No matter how boring the CPA profession is regarded as throughout the world, it is CPA’s who maintain balance and protect consumers from being cheated on by profit-maximizing organizations. The path one chooses to become a CPA is hard enough, but the struggle doesn’t end there. Once you qualify as a CPA, you have to work relentlessly, meet audit and tax return deadlines for your clients, identify inefficiencies, give audit assurance to shareholders, and do all of that hard work for your accounting firm too.
Regular advancement in technology only adds to the struggles of CPAs. The tax system is getting digitalized more and more, creating numerous complications for CPA firms while not only preparing returns for their customers but also themselves. Hence, there are several challenges faced by small CPA firms, including tax issues.
In this article, we will discuss the top issues faced by small CPA firms while preparing their income tax returns:
- Rush Tax Season: As per Internal Revenue Service (IRS), all corporate firms and individuals must file their tax returns for the year ended 31st December by 15th March and 15th April, respectively, of the next calendar year. So, there are only two and a half months for CPAs to prepare the income tax returns for all their corporate clients, including their returns. It’s no surprise that the CPA team feels overworked during this rush tax season, and with the deadline over their heads, the business owner may prepare tax return hastily or recklessly. An ill-prepared tax return can cause penalty troubles for the small CPA firm, which is already lacking cash and resources.
- Compromising Entrepreneurial Responsibilities: Unlike large organizations, small businesses do not have access to abundant resources. And due to lack of resources, the owner must compromise on entrepreneurial responsibilities required of him, and actively take part in providing quality services to the customer. One of the primary responsibilities of the CPA owners towards their firms is to file accurate tax returns on time. Being busy making their brand name by providing professional services to clients leaves the owners with low energy and lack of time to prepare their income tax returns.
- Challenging VAT Returns: If your CPA firm is providing services to several states throughout the USA, it means that different VAT tax-laws are to be followed while preparing your sales tax return. All 52 states of the USA have different tax laws, and staying updated with them is quite a brainer. It can be a handful for the CPA business owner to evaluate the amount of VAT to be collected if they are offering accounting and tax services to more than one state in the USA.
- Ever-Dynamic Taxation World: The government is always tampering with taxation policies for the betterment of people. The tax rules can not stay constant and must be improved time after time. Given the load of work that CPAs are burdened with, they can’t stay updated with new tax trends. This may result in the CPA owner missing out on new tax breaks or changes in tax policy, which may also lead to a penalty in a worst-case scenario.
- Technological Gap: With technology advancing better than ever, many states have digitalized their tax systems. However, becoming a CPA doesn’t come with technology training. It can be quite troublesome for a CPA to keep up with the ever-changing tax preparation technology. Given how swiftly technology goes obsolete, one year can bring several changes in the digitalized tax system, causing the CPA to adapt to the changes all over again.
- Tax Responsibilities: Tax experts and CPAs also play the role of being the middleman between corporations and tax authorities. However, in the case of a CPA business owner, they have to deal with litigations and complicated tax procedures based on their expertise. CPA owners carrying the burden of truckload work, it may be impossible for them to deal with the tax authorities on their own in case of a conflict.
It may be concluded that amongst several hardships that a start-up CPA firm has to handle, tax issues can turn out to be a huge obstacle for the business owner. One essential solution to this problem could be outsourcing the preparation of income tax returns and sales tax returns to tax experts. Such outsourcing tax firms have mastery in tax regulations and protocols, have access to the best tax software and are cheaper than hiring an all-time tax employee.
While the CPAs go out on a mission to satisfy their clients, they don’t have to worry about their taxes at all. This also leaves the CPA owners with more time and energy to focus on the growth and expansion of their accounting firms.