The due date for tax returns for a Michigan S Corporation is March 15. Thus the pressure has been on to get the corporate taxes completed. There’s also the matter of getting them to the shareholders as early as possible for use on their personal tax returns.
In the past I’ve contracted with an accounting firm to do the returns. In retrospect, this has always been a good idea. It only costs a couple hundred bucks and it’s a legitimate business expense. However, this year the business operations were fairly simple, some tax laws have become more favorable, and I just felt confident that it wouldn’t be that bad. I decided to do the corporate taxes myself.
The 2003 “S Corporation Income Tax Package” arrived back in December and consists of 55 pages of instructions (not including all the forms). Having read these before, I immediately turned to the “Paperwork Reduction Act Notice” page to see the “estimated average times” to complete the tax forms. These are, if you haven’t ever seen them, a bit humorous themselves. An example just for the basic form 1120S consists of the following time estimates:
Recordkeeping: 65 hr, 45 min
Learning about the law/form: 25 hr, 11 min
Preparing the form: 47 hr, 44 min
Copying, assembling, and sending to IRS: 5 hr, 54min
That’s just for the 1120S, it doesn’t include the accessory forms like the Sch K-1(s), Sch D, etc. Record keeping is something that needs to be done for business purposes and I’d say that 65 hours is a reasonable average. I scoffed at the other time estimates. Twenty five hours to learn about the form? Over 47 hours to prepare the form? Another 5 hours to assemble it and send it to the IRS? If it’s that bad, it’s well worth paying a CPA to do it. But then how will I know if I really am an above average idiot?
I started the taxes one boring day in January. I read the first half of the instructions, fillng out the forms as I went. In quite a few instances, I had to pay a visit to the IRS web site to download publications. Ah yes, the paperwork reduction act. I feel for people without high speed internet. After spending the better part of the day, I had enough and dropped the forms into my inbox. Taxes are like visiting inlaws, they are best done in small doses.
This afternoon I (finally) aroused the courage to spent another 6 hours making Uncle Sam happy with me. I completed the corporate taxes and in total, I have about 16 hours spent in the “learning, preparing, and sending” stages of tax preparation. That compares quite favorably with the “average” of over 78 hours. I can sleep better now.
I imagine some of the reason for the difference is my accounting system which makes it easy to arrange the books so that I can spit out a few reports that have all the information I need to fill out my tax forms. Folks with filing cabinets full of ledgers must be looney or suicidal after 77 hours. I can’t imagine wasting two full work weeks on taxes.