It can be risky to do your own taxes

Small-business owners sweating their way through an arduous income tax season would likely prefer this scenario: Their bookkeepers handing over to their accountants CD-ROMs that contain all the information a CPA needs to complete the companies’ tax forms.

Company owners who were asked to explain what makes tax time easy for them mentioned using technology and getting help – either outsourced or in-house – to keep track of their finances before and during tax time.

“I hired a great bookkeeper and put them in touch with my accountant,” said Paul Marciano. It not only makes taxes easier – it also allows him to focus year-round on the nonfinancial aspects of running his two Flemington, N.J.-based companies, Whiteboard, a human resources consultancy, and a children’s greeting card company, Coloring Card Co.

Marciano noted that the financial side of the business isn’t his strong point. “There’s so much risk associated with doing it badly. I don’t think there could be any more important investment than from day one identifying someone with expertise in the area,” he said.

He also credits his record-keeping software. “There’s no greater feeling than walking into your accountant’s office, handing him the QuickBooks file and saying, ‘I’ll see you in a year,” Marciano said.

Buddy Howard also swears by his accountant and his software, and has also learned from other companies’ mistakes. Howard, who owns Equity Research Services Inc., a Raleigh, N.C.-based independent research firm, said he’s seen many businesses fail to put money aside to pay their taxes and then be caught short.

“It’s the biggest problem I’ve seen after talking to some of the small businesses,” said Howard, whose work includes putting together company valuations.

His software – which Howard calls “worth its weight in gold” – helps keep him organized and gets him through his company’s tax issues without being blindsided.

For Brian Drum, the best way to get through tax season and the rest of his company’s financial year is to have an in-house controller who’s a certified public accountant.

Drum, the chief executive of Drum Associates, a New York-based executive recruiter, had someone on staff to take care of financial matters when he started the business in the late 1960s. But that position became a casualty of recession in the 1970s.

Drum said he then divided financial responsibilities such as accounts receivable and payable among other staffers and made do with that setup until five years ago, when his business all but disappeared in the aftermath of the Sept. 11, 2001, terror attack that destroyed the World Trade Center located near his company’s offices.

“What am I going to concentrate on?” was the question Drum had to ask himself. His answer was to hire a controller so he could rebuild the firm.

Drum said the company runs better because it has its own controller.

“We are doing more planning, more strategy than ever before,” he said, noting that when responsibilities are parceled out to different people, it can be harder to look at the bigger picture. “It’s more transactional, as it happens,” Drum said.

Since he hired a controller five years ago, he has more time for generating new business, and in turn, helping the company grow.

Having help, human and technological, also lets Megan Licursi deal with other issues. At tax time, she needs to be sure that the companies she’s done marketing and public relations work for send her their 1099 forms. Jostling the companies, some of whom might have forgotten to send the forms, or even deliberately omitted them, is her biggest tax headache.

But as far as compiling her return, her CPA “makes everything a breeze,” said Licursi, owner of MLMC in Amelia, Ohio.

Licursi also uses accounting software to keep her books, something she chooses to do on her own. Echoing the sentiments of other business owners, she said, “it’s really easy if you keep organized.”

Joyce Rosenberg writes about small business issues for the Associated Press.