Choosing a tax preparer for your voice-over business
Feb 10 2017
Some people have a head for rules and numbers, . . . some other people don’t — but manage to deal with them anyway, . . . and other people are better off assigning such work to someone else. Taxes are like that. For your voice-over business, you probably keep the books yourself. Do you prepare your taxes yourself? Would you have more time and/or peace of mind if you hired a tax preparer or accountant? Or will software do the trick?
We’ll let you evaluate the software approach, as there are reviews online, and trial periods or even free name-brand tax and accounting products to choose from. To those resources we’ll just add a few observations:
- Sometimes the software is free for the Federal tax return, but you then have to buy the State module to complete the task.
- Bookkeeping software, which can interface with the publisher’s tax software, is helpful only if you use the bookkeeping. If you fail to maintain your computerized records on a regular basis, it won’t magically automate your tax return, and your job at tax time will be even bigger.
- Popular software is designed to be used by an entire range of people and/or small businesses. As voice talent, you are in a particular kind of business, and may need to make some judgments related specifically to the VO or acting industry. Does it know, for example, that you can deduct a suit purchased for use on-camera, but only if you NEVER wear it otherwise?
- There may be additional forms or taxes related to your business. These may or may not be included in the software package. In fact, you might not even know about them till rudely informed by a penalty notice.
We think we have the above examples correct, but as with anything we say here regarding taxes or the law, consult your financial or legal advisor.
Which brings us back to our topic: How do you find such an advisor?
Start by making a list of prospects. Search online and in social media, but also check with local business associations or similarly situated professionals. Even with your competitors. It’s important to interview more than one. It may put you more at ease, and in each case, the process of talking to them will help you evaluate the others.
Location. If your accountant is intimately familiar with the tax laws and rules of your state, it might not matter if you work with them remotely. Many preparers give you a detailed questionnaire that you fill out and send back. Or maybe even submit online. For a once-a-year task, you can mail it to them, even. But if you tend to hand over a shoebox full of receipts, or feel more comfortable with an occasional conversation about your business or concerns, complete with handshake and being seen as an actual person, then choose someone nearby, and who has a few spare minutes to chat with you.
What will they need from you? Do they prefer that you fill out a questionnaire (actually, a small folder of many pages with all the various income and expense possibilities), or do they accept a computer data file? If the latter, what kind? It will need to be compatible with whatever software they use. Will that affect what software you should use? (If you even use software.) If they ask you to exchange sensitive data online, is the connection secure? Technically, ordinary email is not.
Are they a tax accountant, or a general accounting service? For your taxes, you need a tax specialist, not a bookkeeper. And if you use them for bookkeeping (or give them a mess of paperwork), expect to pay by the hour. Which will probably be expensive.
Do they specialize in very small businesses, or artists and performers? In addition to understanding how your voice-over income and expenses are seen by the tax authorities, your provider’s familiarity with similar professions might give them valuable insight into opportunities and things you’re doing right or wrong. For example, sometimes you have the option of choosing between depreciating or expensing major office or studio equipment. The best choice may depend on your personal situation. And an accounting firm that is used to serving, say, a small ad agency might not be set up for efficiently serving a lot of sole proprietors. Or even want to.
Are they also a financial advisor? A business consultant? In many cases, a tax preparer only does your taxes. Even if they specialize in serving people like you, they might not give you advice you unless you ask. So ask. For example, if you deduct for the part of your home used exclusively as a home studio, will that affect your taxes when you sell the house?
Ditto with regard to financial planning and/or investment advice. Doing your taxes each year is one thing. Setting up a retirement plan is another thing. Advising you as to whether you should set up a retirement plan (and what kind) is yet another thing. And outlining what to expect in retirement, may be yet another. Be prepared to pay extra for the extra service, (see below) and decide over time whether it is of value to you. Naturally, you want them to be well qualified in whatever service they give you.
Are they a Certified Public Accountant, or a Chartered Accountant, or a tax attorney? Industry certification is a sign that their expertise is respected by all parties, and that they are current (or at least, should be) on the various tax laws, regulations and boundaries. On the other hand, their expertise might be more than you need from year to year. And if they don’t specialize in taxes, they might not be an appropriate choice. A real estate or divorce lawyer might also be up to doing your taxes, but may not have the VO industry insights and knowledge you need.
Is the person you interviewed the person you will deal with and who will prepare your taxes? If not, ask about that person, too, and ask to meet them.
How long have they been in business? That is, how long doing what they want to do for you?
References? Although some people figure that no prospective provider is going to give you bad references, so why check them, ask for them anyway. And check them. This tells you two things: 1) if they’re shy about giving you a few client names (assuming you’re not a CPA yourself!), or if the references are very stale, or something like that – how come? 2) If the references aren’t similar to you, or are relatives, or are not glowing, consider that. Sometimes a person will give out lousy references; figuring people won’t check them anyway. But when you do check them, don’t waste their time. Have just a few significant questions that they can answer in an email or (preferably) a short conversation.
Cost, how it is structured, and what it covers. A CPA will cost more than the mall’s tax storefront. But your return will probably be more complicated than most peoples, because as a voice artist you have not only your personal forms to complete, but those for your business entity, with its related expenses. (E.g. Sole Proprietorship, etc.) Most providers we’ve encountered charge a flat fee for preparing all annual returns. It may seem high, and maybe it is. It might also be worth it, if it saves you days of your time … time better spent performing or growing your voice-over business.
Shop around to see what the range of fees is in your market. But be sure to compare apples and apples. Does the fee include alerting you to additional taxes and/or forms you might encounter? For example, a local small-business tax? Do they charge extra for preparing your quarterly estimated tax payments? Do they charge extra to assist you with IRS correspondence or (shudder) an audit? (Probably no extra charge for a quick question about an IRS letter, but yes, probably extra charge if you’re audited.) Do they charge extra for advising you as to your VO business plan or financial planning? (Probably yes.)
Also ask if there is a way you can knock their fee down a bit. For example, if you get your data to them very early, or allow them to file a routine extension past tax season, which might help smooth out their workflow?
Get your candidates’ charges and explanations in writing, or follow up each with a confirming email.
How’s the chemistry? As with a personal physician, competence is paramount, but bedside manner is also significant. Just don’t let this be the only factor. We’ve all heard tales of financial service providers who schmoozed a great game, but didn’t deliver. They’re rare, but they do exist.
Do they promise you something that seems too good to be true? You know the adage: If it sounds too good to be true, it probably is. There are legal ways to reduce what you pay (tax avoidance), and there are illegal ways (tax evasion). Your preparer must keep you on the legal side of the line – it’s your neck at risk, not theirs.
(By the way, write your checks to the government, not to your service provider. They should not need to actually handle your money. If they are in control of your funds, that’s a whole different set of issues, not covered by this article!)
And when it comes time to sign your return, read it first. If there’s something you don’t understand, ask them to explain so that you do. If still unsure, ask them for proof, chapter and verse or check other sources.
For additional insight see Financial planning for the voice-over professional, June 3, 2016.
Do you have a comment or suggestion? Please send to [email protected].