Tax Filing 101: Choosing the Right Filing Method

While there is no “one size fits all” solution when it comes to tax filing, being equipped with an arsenal of facts may steer you in the right direction. Check out this helpful guide from our friends at Bench to get started.

This guest post is brought to you by Bench, the online accountants that use your Shoeboxed receipts to build you tax-ready financial statements.

Tax season is fast approaching and many small business owners are facing the same dilemma – what’s the best way to file taxes? While there is no “one size fits all” solution, being equipped with an arsenal of facts may steer you in the right direction.

Option One: DIY

This is ostensibly the cheap and dirty method, but what does filing on your own really cost?

Cost (Not Including Bookkeeping)

Assuming that you pay yourself a wage of $20.00/hour, the cost of filing business taxes on your own adds up very quickly. Based on IRS estimates of time spent filing tax returns, these are the prices you’re actually paying to file yourself:

Form 1040, Schedule C (sole proprietors):  $200.00 1
Form 1065 (partnerships): $640.00 2
Form 1120/1120S (corporations): $1,540 3

Accuracy

One of the most important aspects of filing taxes is accuracy – both to ensure that you get the maximum available refund and to avoid the steep penalties charged for filing errors. To put this into sharp perspective, it is estimated that Americans miss $1 billion in available deductions by attempting to file taxes unassisted – that’s $460.00 per person!4 In addition to that, in the event of an error with your tax return, you will be personally liable for any associated penalties and interest charged. Oh, and just because they can, the IRS accrues interest on outstanding payments and penalties daily.

Support

The IRS website? Google? Filing taxes unassisted is just that – unassisted. And if you happen to get audited, you will also have to represent yourself in front of the IRS or pay for professional representation.

Option Two: Invest in Software

As with almost everything else in life, filing taxes is moving into the online realm, with nearly 30% of Americans choosing this method.

Cost (Not Including Bookkeeping)

Like filing unassisted, the real cost to calculate when considering this option is the time you spend using the software, which will vary considerably depending on your familiarity with the program and the complexity of your tax return. The following prices are for TurboTax Federal & State filing, plus a conservative estimate of your time invested.

Form 1040, Schedule C (sole proprietors): $150.00 – $190.00
Form 1065 (partnerships): $300.00 – $500.00
Form 1120/1120S (corporations): $490.00 – $720.00

Accuracy

All tax filing software comes with a “maximum refund guarantee,” which entitles you to a refund on the price of the software if you can get a larger refund using another filing method. Just keep in mind that you would have to actually file your taxes by another method to claim this refund – and absorb the additional cost of doing so.  In the event that you are slapped with any filing penalties, you will be reimbursed only if the offending error was caused by a software miscalculation – not a user error.

Support

All software programs have built in support features like live chat and telephone assistance – though you will likely speak to a different person with every issue.

Option Three: Use a Retail Tax Service

If software just isn’t cutting it, but you’re not ready to invest the time and money to find a qualified CPA, you may consider a walk-in service.

Cost (Not Including Bookkeeping)

Retail tax preparers, like H&R Block and Liberty Tax Service, generally charge per form. While the best way to know for sure is to receive a quote, the following are the average prices you’re looking at:

Form 1040, Schedule C (sole proprietors): $200.00 – $250.00
Form 1065 (partnerships): $500.00 – $700.00
Form 1120/1120S (corporations): $750.00 – $850.00

Accuracy

Retail tax preparers are backed by a guarantee policy that covers you for both penalties and missed deductions; however, as with the software guarantee, you would have to catch the missed deduction in order to claim the refund. One other important thing to note about accuracy is that registered tax preparers are not required to have any education in taxation and do not have to pass any competency exams – though the IRS is attempting to change this.

Support

Your tax preparer will be able to answer questions throughout the process of filing your return, but year-round support is limited as the retail tax industry is extremely seasonal and the vast majority of employees are only employed from January – April. In the event of an audit, tax preparers are not licensed to represent you in front of the IRS.

Option Four: Call in the Pros

This option will cost you the most up-front, but it will also save you the most in the long run – much like paying for regular car maintenance to preserve the life of your vehicle.

Cost

Most CPAs and EAs charge by the hour, so the easiest way to reduce your tax bill is to ensure that your books are well maintained and that you have all the required documentation ahead of time. The following are the average price ranges for professional tax preparation, though price varies considerably by situation, location, and experience.

Form 1040, Schedule C (sole proprietors): $250.00 – $500.00
Form 1065 (partnerships): $500.00 – $1,000.00
Form 1120/1120S (corporations): $1,000 – $2,500.00

Accuracy

Both CPAs and EAs have significant education and experience in taxation. In addition, they’re required to undertake continuing education to stay up to date on changes to tax law. Not only will a CPA or EA get you the maximum available refund when your taxes are due, they will also work with you to create a customized business plan that minimizes your tax bill over time.

Support

Personalized year-round support is the greatest benefit of using a qualified CPA or EA. While other tax preparation options may be able to provide a comparable tax refund in April, only a CPA or EA can advise you on how to significantly reduce your tax bill over time through calculated tax planning and business structuring. Finally, in the event of an audit, both CPAs and EAs have unlimited ability to represent clients in front of the IRS.

Bottom Line?

There are a whole host of factors to consider when choosing a method to file taxes, so you really have to take the time to find the option that works best for you.

If there is one thing that holds true for any method, it’s that good bookkeeping and solid preparation are the easiest ways to reduce both time and expense in April (or March for corporate returns)!

To get a head start this year, learn “How to File Your Taxes in 5 Minutes per Day!


This post is brought to you by Bench. Bench is the modern bookkeeping service that provides audit-proof financial statements from online accountants at an affordable fixed price. Not in the software business or the accounting business, Bench is in the business of solving accounting problems and letting clients spend more time doing what they love.

Conquering Fear and Building Businesses: A Shoeboxed Success Story

In this User Success Story, Shoeboxed Ambassador Amanda Larrinaga shares her story of how she conquered fear to help small businesses be successful.

With Shoeboxed, there has never been one “best” way to use our service to stay organized. And after processing over a billion dollars of expense data since 2007, we say that from years of firsthand experience!

Shoeboxed takes enormous pride in serving clients from around the country and across the globe, all of whom use our service in a myriad of ways to fulfill a whole host of organizational needs in both their personal and professional lives.

amanda larrinaga ambassadorIntroducing: Amanda Larrinaga

Profession: Owner, Modern Entrepreneur

Location: Denver, CO

Website: www.modernentrep.co

Twitter: @AmandaLarrinaga

LinkedIn: Amanda Larrinaga

“The biggest pain point for me was having to go through my receipts to scan and organize them in a way that was manageable for my accountant. Shoeboxed makes it super quick and simple; it’s such a great value.”

-Amanda Larrinaga

Shoeboxed: Hey Amanda! Thanks for taking the time out of your busy schedule to chat with us. We’re thrilled to be interviewing another Shoeboxed Ambassador as part of our User Success Series. So, let’s get started! Tell us a little bit about yourself.

Amanda Larrinaga: Absolutely! I grew up in Boise, Idaho, and have lived all over the west, from Bozeman, Montana, to San Francisco. I now live in Denver, Colorado. I went to Montana State University and studied health and human development.

SBX: Interesting– that seems pretty different from what you’re doing now! Can you share a bit about what you do?

Modern EntrepreneurAL: Sure. A year and a half ago I founded a company called Modern Entrepreneur; we help entrepreneurs make their dent in the universe. We help them bring more of what they’re doing into the world. So for us that means finding a pain point that we can help solve and implementing solutions, whether that’s identifying new sales channels, or diversifying their marketing strategy, or finding potential partners for the business.

SBX: That’s a new way to describe the role of a consultant, but I think it’s awesome! So what kinds of businesses do you work with?

AL: We work with a lot of startups and growing businesses, most of which are under 3 years old. A lot of the time it’s in their first year of business. Since I worked in startups for almost 10 years and have helped a number of companies go through launch, it’s the perfect fit for me. I’ve been the first employee or contractor for a lot of these businesses; I’m the person they bring on board to help them really get off the ground. I like to meet with them and identify pain points, point them to some things they should check out (like Shoeboxed!), and then cultivate the relationship from there.

SBX: It must be exciting to work with companies in their early stages! How did you get to this point in your professional life?

Amanda Larrinaga 1AL: I was going to school in Montana, and I liked what I was studying, but I was having trouble seeing the kind of work I would want to do after college. I would be sitting in a class with a teacher who was jaded from doing social work, trying to teach us about a field they had left. That just seemed backwards to me. I needed something that I could really get excited about. Overall I just loved learning, so any opportunity I had to go and try something new, I jumped on it. Anything I could get my hands on, from AmeriCorps to volunteering in New Orleans after Hurricane Katrina.

One thing that really stuck out to me was that the oldest publication in Montana was going to be shut down because of mismanagement. And I was like, “There’s really no way to solve this? It can’t be that hard!” Keep in mind that, at this point, I was still in school and had zero business experience, zero writing experience… but I applied to be the editor-in-chief. They figured it was a no-lose situation for them, and I got the job. Since the company had been so poorly handled for decades, it was basically like rebuilding a business from the very beginning. From hiring and training staff, to learning and improving the whole process of taking the publication to print, to learning what to sell and for how much. The whole thing was just a big, complex problem to solve, and I loved just figuring it out. I wasn’t even 20 yet and I had sixty employees! It was awesome. So after that, I got a job at a startup in Montana, then moved to Silicon Valley and now I’m here outside of Denver.

That experience taught me that solving puzzles is what keeps my attention, so now I try to take on projects that are exciting and interesting to me. When I’m deciding if I’m going to work with a prospect, mostly I look for a solid mission and strong leadership.

SBX: That sounds like a solid strategy, and it’s obviously paying off! Your business is growing and runs mostly on referrals, right? That must mean you have some pretty happy clients. Why don’t you tell us a bit about what your experience getting Modern Entrepreneur off the ground has been like?

AL: I actually have a recent experience that sums it up pretty well. I’m currently working with a copywriter on an email campaign based on a blog post I’d written about fear, and how you have to go ahead and put yourself out there. Part of the message came out something like, “I’m not scared anymore,” but I’m actually terrified. However, once you’ve done it a few times, it gets easier to cope with the fear, the anxiety and the uncertainty. Making the commitment and finding success can make you brave, and it empowers you to take on new problems you face, like how to grow and scale. Always having new puzzles to solve keeps it interesting and exciting. Like I said, I just love figuring out complex problems, and growing a business is certainly one of them. It’s a constant learning experience. Every client we meet, every project we work on, there are foundational similarities where we can apply things we’ve learned in the past; but since every business is different and faces different challenges, that’s where our custom solutions come in. Everything from the technology we recommend, to the kind of people we need to hire. I get really bored doing the same thing every day — which is why I moved away from being a startup employee to consulting. And I’ve never been happier.

SBX: Those are some really inspiring words! Thank you for sharing your story with us. So, when did Shoeboxed come into the picture?

AL: I’ve been using Shoeboxed since Modern Entrepreneur launched, so about a year and a half now. I knew I needed a solution right as my business was getting off the ground. As an entrepreneur myself and after working for startups, I knew that keeping receipts and accurate records was important. So I would keep my receipts, but the pile inevitably got bigger and bigger. When I had to do taxes or my lawyer needed a particular document, it was a total nightmare. I had tried to scan the receipts myself, but it was so time consuming, and I am not detail-oriented enough to make sure that everything was sorted properly.

I remember asking one of my assistants to help me find a solution that would be mobile and super easy to integrate into my existing workflows. We found Shoeboxed, and I have never looked back. We started using it during tax season to be sure that we had digital versions of everything. We later decided to transition our office to be completely paperless, so Shoeboxed helps with that as well. Shoeboxed allows me and my team members to have access to everything we need, anywhere we are.

SBX: That’s awesome! It’s great that you’re using us for taxes, as well as for going paperless. We love to hear it when users find our service useful for more than one end goal. :) Can you tell us about how Shoeboxed fits into your workflows?

AL: Sure! I love taking pictures on my phone, it’s quick and something I can do right then, instead of waiting until later to take care of it. I’m notoriously bad about how often I send in my Magic Envelopes – I’m working on it! – but I do use them to digitize other important documents for my accountant or just things I need to keep. I also use the integration with Wave since we use their accounting platform; it’s super simple to have all of your receipts pulled into Wave where you can easily take advantage of all the features they offer.

SBX: That’s great. It sounds like you’ve found a solution for every type of paper you have to handle! So how would you describe the value that Shoeboxed brings to your business?

AL: Shoeboxed provides enormous value, both for my small business and for my sanity. Ha! But honestly, it helps me save money on my taxes by ensuring that I never miss a deduction. Also from an audit perspective, knowing that you have a digital version that you can find and access so easily, that gives me great peace of mind.

The biggest pain point for me was having to go through my receipts to scan and organize them in a way that was manageable for my accountant. Or if I didn’t do it, I’d have to pay and arm and a leg to have them do it for me. That’s not a good use of my time or money, or my accountant’s time either, honestly. Shoeboxed makes it super quick and simple; it’s such a great value.

When you’re running a startup, managing receipts is just one of hundreds of things that falls on your plate. You know it’s important, but it’s not a good use of your time so it always falls to the bottom of the list. It’s a source of stress, and it makes you feel guilty that you haven’t kept up with your receipts and expenses. It may seem like a small thing, but it was a huge weight off my shoulders to be able to do it in a few seconds here and there by stuffing an envelope or taking a photo. Now, if my accountant has a question about something, he can access my receipts almost immediately after I send them in. What’s even better is that I write notes on each receipt about what the expense was and he can then code it correctly without having to ask me. My accountant gets almost all of the information he needs without taking up any of my time. I love it and recommend it to everyone I know!

SBX: That’s why you make such an awesome Shoeboxed Ambassador! :) So, switching gears a little bit, what do you do when you’re not helping small businesses be successful?

Amanda Larrinaga 2AL: I love to travel, especially to explore my Basque heritage. My favorite trip was backpacking through Europe. I made it a point not to stay in hostels; I stayed with friends, family, strangers. I’d been to Europe a couple times before that trip, and I knew there were things you didn’t see if you were stuck on a tour. So this time around, I decided the best way to understand the culture and the people who live there was to stay with locals or rent an apartment instead of a hotel or hostel room. So now I’m a total travel addict. I travel pretty frequently to places where we know people, even if it’s random places. It’s just so much more fun and interesting doing it that way. You get to see everything from hole in the wall restaurants to places only locals know about.

SBX: That’s awesome! It’s so important to take a break from work and get out of the office, so traveling is a great way to do both of those things. To wrap this up, give us your best time saving tips and tricks! This is kind of what you do for a living, right? ;)

AL: Absolutely! To start, stay out of your inbox. Business owners and small business employees end up spending so much time in their inbox, going back and forth sending emails exchanging minutiae and details. It’s incredibly inefficient and not a good use of your time. To combat this, we use Asana for everything– even small things, like moving to a new file naming convention. Every item has a name, a due date and all important details go there. You can even ask questions about projects and answer them through the tool, allowing me to knock them out right then and there without clogging my email inbox. I can see the status of all the projects, all the files that go with it, and the timeline all in one place. It’s great.

Another tool I would highly recommend is Fancy Hands. They’re a great one-size-fits-all solution, unlike some virtual assistants. The assistants at Fancy Hands can basically handle every task you don’t have time to tackle. They can schedule and move meetings and appointments, coordinate travel, even wait on hold for you– all for an incredibly affordably price point. For example, if I have to call my bank or PayPal with a question, then they will sit on hold for me and then patch you through once an actual person answers. How awesome is that! They also have a great iPhone app, so I can quickly create a task as soon as it pops into my head.  They keep track of how much time you saved using them. Right now, in 60 days, they’ve saved me from sitting on 111 calls, 12.2 hours on the phone and saved 2.3 days overall. It’s an awesome tool for busy small business owners, and they’re all trained and based in the US so that the time difference and quality is always there. They also have fantastic customer support, just like Shoeboxed, so I love them.

SBX: That’s an awesome compliment – thank you! We really appreciate you chatting with us and sharing your productivity secrets; I’m sure all of the small business owners reading this will find it really helpful.

Are you a Shoeboxed user who has a success story and would like to be featured on our blog? Then we would love to hear from you! Please reach out to Emily at emily@team.shoeboxed.com for more information.

Until next time, stay tuned… and stay organized!

The Story of the Five Dollar Bill

Here at Shoeboxed, we know that our customers are the best in the world. We do our best to bring you a magical experience every time you interact with Shoeboxed, but sometimes we can’t help but be humbled by how wonderful you all are! This story of one customer’s incredible generosity made our month, and we’re excited to share it with you.

Here at Shoeboxed, we believe know that our customers are the best in the world. We do our best to bring you a magical experience every time you interact with Shoeboxed, but sometimes we can’t help but be humbled by how wonderful you all are!

Last week, we received a Magic Envelope filled with all the usual paper clutter– receipts, bank statements and similar stuff. As one of our operators was scanning the last few papers, a five dollar bill fell out. We did what we always do — write a quick note to let the sender know that they had accidentally included some cash or coins in their envelope, stick it to the offending currency and put it back in the return envelope. No big deal.

A few days later, we got a tweet from Drew Golden, founder and managing director of Golden Capital Partners, thanking us for returning his $5 and starting that he wants to donate the money to a charity of our choice. It was the most original and awesome way to thank us for great customer service that we’ve ever experienced! So, we tweeted back to Drew at @GoldenCapital1 that we had chosen the American Cancer Society as the charitable recipient in a tweet and went on about our day.

Drew Golden TweetOn Wednesday, we got another tweet from Drew letting us know that he had donated $500 instead of just $5 to the American Cancer Society in honor of our honesty and fantastic customer service. We were floored by his generosity and humbled that he did this all because of a five dollar bill.

Drew included the hashtag #payitforward in the tweet, and that got our minds churning here at Shoeboxed about how we can do exactly that here in our local community. Stay tuned to follow our mission to give back in 2014, and of course, a big thank you to Drew for being an awesome customer and for his generosity!