Think back to a time before you owned a business. You could call practically any annual tax firm and get filed by the deadline. Now that you also need to file business taxes, do you still handle tax season the same?
You can, but there are a few reasons why you may not want to. Let’s compare the tax filing processes of an annual firm versus the tax filing processes of a monthly firm.
At CSI Accounting & Payroll, we’ve provided monthly accounting services to small businesses for nearly 60 years, so we know all about the differences in tax processes. In this article, I’ll answer:
- What is the tax filing process like with annual firms?
- What is the tax filing process like with monthly firms like CSI?
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Annual Tax Preparation Firms |
Monthly Accounting Firms (Like CSI) |
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Overall Approach |
Just handles tax preparation once a year. Tax time is often stressful, rushed, and reactive. Many clients wait for weeks or months for updates or to be scheduled. |
Maintain financials year-round, so taxes are a natural progression of ongoing work. Tax time is calm and organized. Clients know what they owe well before the deadline. No surprises, no scramble. |
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Extensions |
Commonly put many clients on extension to spread out the workload. Extensions delay filing but not payment, which can lead to penalties if estimated payments are short. |
Rarely use extensions. Filing is typically completed on time since books are already up to date. Extensions are only used if the client delays providing information. |
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Client Base |
Broad, often taking any client who walks in during tax season. This contributes to workload bottlenecks in March and April, causing delays and limited communication. |
Focused on small businesses and their owners, maintaining manageable client loads for higher-quality service and on-time filings. |
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Accuracy |
Accuracy depends on client-provided bookkeeping. Many firms don’t verify financials, so errors in self-prepared books carry over to tax forms. |
Books are maintained and reviewed monthly, ensuring accuracy. Once December books are finalized, tax prep can begin ahead of schedule. |
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Tax Savings & Advice |
Limited, after-the-fact advice based on the prior year’s performance. Opportunities for savings are often missed until the next year. |
Ongoing communication allows for proactive, timely advice. Clients can make real-time adjustments throughout the year to maximize deductions and credits. |
Tax Filing Processes of Annual Firms
Overall, annual firms get the job done. They can be a good solution for many business owners who have little financial activity and want to handle bookkeeping themselves. However, there are a few areas where they fall short of perfection.
In this section, I’ll discuss the following aspects of filing taxes with an annual firm:
- Extensions
- Client base
- Accuracy
- Tax savings and advice
Extensions
Annual firms only provide tax filing, which is intended to be done between January and April. So they put as many clients as possible on extension to spread out the work.
Extensions are great for them… but not for you. They only change when your forms are due – not when your payment is due. You’ll need to make estimated payments, and if you’re short, you’ll face penalties and interest.
Client Base
Annual firms are also heavy on extensions because they accept all types of clients and get bogged down at tax season. Many say they’ll take you during tax season, but they won’t touch any of your work until at least May.
Accuracy
Your tax forms are only as accurate as your financials. Many annual firms don’t check bookkeeping for accuracy, so if your self-prepared financial statements are wrong, you’re out of luck.
Tax Savings & Advice
No accountant can directly change what you owe. You need to apply their advice to find savings. Annual firms offer some advice when you meet to discuss your taxes, but it’s based on your prior year after-the-fact.
Tax Filing Processes of Monthly Firms
Monthly firms are an upgraded accounting experience, intended for businesses with more financial activity who want to outsource to see more insights from their data.
Although their tax planning process goes beyond what annual firms can provide, monthly firms don’t do anything special with the filing process – but their business structure offers plenty of benefits by the time taxes roll around. Let’s compare these aspects of a monthly firm:
- Extensions
- Client base
- Accuracy
- Tax savings and advice
Extensions
Monthly firms work year-round, so they feel no need to use extensions to spread out the work like annual firms do. In fact, monthly firms like CSI Accounting & Payroll do everything possible to avoid extensions. The only time we use extensions is if a client has not provided all of the necessary information to file their taxes on time.
No extensions means no worrying about whether your taxes are being done. It also means you know what you owe, so no estimated payments, and no penalties for not paying in enough.
Client Base
Unlike annual firms that take on everyone, including non-business clients who walk in last minute, many monthly firms like CSI limit their client base to only small businesses and their owners.
This client focus is part of how monthly firms avoid extensions, even if you join them during tax season.
Accuracy
Above, I mentioned that your tax forms are only as accurate as your financials, and many annual firms don’t check your books. But since monthly firms handle your books and monthly statements, quality control is ensured.
While we’re on the topic, it’s important to mention that when your December books are done, a monthly firm can start on your business taxes, putting them ahead of schedule compared to annual firms. (You still need to provide your information if they’re filing your individual taxes, though!)
Tax Savings & Advice
Again, no accountant can directly change what you owe, and any savings will come down to you applying their advice. The difference here is that monthly firms offer better communication all year round, from tax time and beyond.
They can advise you on what to do throughout the year to best take advantage of some credits, deductions, and things like equipment purchases or funding retirement plans. It’s proactive advice, not after-the-fact.
Feel Calmer This Tax Season!
Now that you know about the differences between annual and monthly firms’ tax filing processes, are you sold on monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, find out what your monthly fee may be by clicking the image below:
