Tax Time: Do It Yourself or Hire an Expert?

Few people are excited by the prospect of the dreaded “tax season”. Filing taxes can be a complex and daunting task, especially for small businesses and freelancers navigating Swiss tax laws. While some may choose the do-it-yourself route to save costs, others might find hiring a tax advisor more beneficial for ensuring accuracy and optimizing tax liabilities.

This article explores the pros and cons of both approaches, helping you decide whether to tackle tax returns on your own or seek professional assistance to save time and make the most of your financial situation.

Do you need to file tax returns?

Filing annual tax returns is an unavoidable aspect of financial responsibility for individuals and businesses alike. Even permanent employees whose employers withhold their income tax at source are generally still responsible for filing their own tax returns if their income exceeds certain thresholds, if they have additional income, or if they wish to claim deductions not considered in the source tax.

As for self-employed individuals and business-owners, tax filing is essential and often much more arduous. Swiss tax laws can be complex with variations depending on the canton you live or in which your business is registered. Understanding your obligations is the first step in ensuring compliance and avoiding penalties. Personal tax advisors and accountants can be a major aid in helping you clarify your filing obligations and undertaking the task of filing your tax returns for you.

Should you hire a tax advisor?

Filing your own taxes can be a difficult and time-consuming task, especially when dealing with the nuances of Swiss tax laws. This leads many small businesses and freelancers to consider whether hiring a tax advisor might be more beneficial.

What does a tax advisor do?

A tax advisor is a professional who specializes in tax law, planning, and compliance. Their primary role is to provide guidance and support to individuals and businesses in managing their tax obligations. Their main duties and services include:

• Preparing and filing tax returns for individuals and businesses
• Providing advice on tax planning to optimize tax liabilities
• Ensuring compliance with tax regulations
• Representing clients in dealings with tax authorities
• Advising on the tax implications of various financial decisions

Good tax advisors need to ensure they stay up to date with the latest tax regulations so they can use their expertise to help optimize their clients’ tax strategies, minimize tax liabilities, and identify opportunities for deductions or tax credits.

Why hire a tax advisor?

There are many reasons why it makes sense to hire a good tax advisor. Experienced tax advisors don’t only file your annual tax returns for you; they offer much more value, with services ranging from financial advice and strategic planning to tips for reducing and optimizing your tax liabilities. They will even communicate with the tax authorities on your behalf and therefore make your tax matters altogether simpler and more hassle-free.

Here are some key reasons to consider hiring a tax advisor:

• Cost saving: One of the main arguments for doing your own taxes is to save money on tax advisory fees; but did you know that a competent tax advisor can actually save you much more money than what they cost?One of the major advantages of hiring a tax advisor is their ability to help you develop tax strategies which optimize your financial situation. They can identify opportunities for deductions, credits, and tax incentives that you may not be aware of, with the potential of significantly reducing your overall tax liability.
• Time saving: Preparing and filing your own tax returns can be time-consuming, especially for individuals and businesses with complex tax situations. Hiring a tax advisor to handle this instead can save you valuable time and enable you to focus on more important aspects of your business and personal life.
• Expertise: Reputable tax advisors have a comprehensive understanding of Swiss tax laws and protocols. They put in the time to ensure they are always updated with the lates developments in tax regulations and can use their wide knowledge to help you produce accurate and compliant tax filings.
• Avoid mistakes: Mistakes in tax filings can be costly, leading to audits or penalties. A good tax advisor ensures accuracy and compliance, reducing the risk of errors or discrepancies.
• Strategic advice: A tax advisor’s support can go well beyond mechanically filing your tax returns. A trusted and skilled tax advisor should be able to provide you with valuable strategic advice on financial decisions that impact your tax situation, helping you to plan better for the future.

What are the downsides of hiring a tax advisor?

There are not many drawbacks to hiring a tax advisor other than the additional costs involved and the risk of hiring an incompetent advisor:

• Cost: Tax advisory fees can be quite steep. Depending on your tax situation and which tax advisor you decide to use, the costs can vary significantly. If you have a simple tax situation or low turnover, you may feel it’s not worth the expense to hire a tax advisor.
• Risk of poor quality: The titles “tax advisor”, “tax consultant”, and “trustee” are not protected in Switzerland, so it’s paramount to do careful research and make sure you only enlist the services of a reputable professional. Incompetence on the behalf of the tax advisor can have seriously detrimental consequences, such as high penalties and even criminal charges in the worst-case scenario. To learn more about how to find the right tax advisor, read our blog on the subject.

How much does a tax advisor cost?

The typical hourly rate for a tax advisor in Switzerland ranges from CHF 100 to CHF 250, but they can be as little as CHF 70 and as much as CHF 400 in extreme cases. The costs can vary significantly depending on several factors:

1. The level of experience and expertise of the tax advisor.
2. The complexity of your tax situation.
3. The scope of services the tax advisor provides you with.
4. The reputation and size of the tax advisory firm.

It is important to note that a higher rate doesn’t always mean a better consulting service. You should be as cautious of tax practitioners which charge an exorbitantly high rate as you should of those which charge an unrealistically low rate.

Can you use an ordinary accountant instead?

It is also possible to enlist the services of a freelance or in-house accountant to prepare your financial statements, payroll, and help you in submitting your tax returns. The benefit is that an accountant or bookkeeper will generally charge a lower rate than a professional tax advisor. That said, a tax advisor offers specialized knowledge in tax laws which may be needed in more difficult situations and could result in improved tax optimization. For simple tax situations, an accountant might suffice, but for more complex scenarios, a tax advisor’s expertise can be invaluable.

Can you file your own taxes?

It is not mandatory for everyone to hire a tax advisor. Fortunately, tax tools and software have become more widely available, sophisticated and easy-to-use, meaning those with simple tax situations can often manage to complete their own tax returns. This is made easier with the help of free software that can be downloaded from the cantonal tax authorities’ websites.

Why file your own taxes?

The primary reason why some freelancers and business owners opt to file their own tax returns is to save on the cost of hiring a professional tax advisor. This can make sense if your tax situation is relatively straightforward, and/or you have some personal experience with accounting and tax filing.

Some of the benefits of filing your own tax returns include:

• Cost saving: By filing your own taxes, you save on the high fees charged by tax advisors.
• Control: You maintain full control over your financial information and filing process. This is especially desirable for companies with sensitive financial data.
• Learning opportunity: For entrepreneurs who would like to gain experience in all aspects of running a business, filing your own taxes can be a great educational experience, giving you a better understanding of your financial situation and the tax system.

Risks of filing your own taxes

While it is possible to complete your own tax returns if your situation is relatively simple; if you want to save yourself the time and hassle and ensure that everything is accurate, it’s still worth hiring a tax consultant to help you. Filing your own tax returns comes with some risks that a qualified tax advisor can help you avoid, such as:

• Errors: Preparing financial statements and filing tax returns is notoriously complex if you don’t have the right expertise. Without professional guidance, the likelihood of making mistakes increases, which can lead to audits or penalties.
• Missed optimization opportunities: Tax consultants specialize in finding legitimate ways to optimize and reduce your tax liability. If you do your own tax returns, you might overlook many opportunities for deductions or credits that could reduce your tax liability.
• Time-consuming: The tax filing process can be time-consuming, especially if you are unfamiliar with the tax laws and procedures. This can result in significant opportunity costs, as that time could have been better spent focusing on improving your core business. Additionally, tax filing is not exactly most people’s idea of a good time.

Tax software and other tools as an aid

Fortunately, major advances in tax software and tools over recent years make it easier than ever for those who are determined to do their own tax returns without the support of a tax advisor. To mitigate the risks associated with completing their own tax returns, many are turning to these software solutions that simplify and automate their filing process. These programs offer step-by-step guidance, ensuring compliance and helping to identify potential deductions and credits.

Popular tax software options in Switzerland include:

• Dr. Tax: Known for its user-friendly interface and comprehensive support.
• Cantonal tax software: As each Swiss Canton has its own specific tax regulations, many cantons offer their own software solutions that can be downloaded from the cantonal tax authorities’ websites.
• Various accounting software options such as Bexio, Abacus, Microsoft Dynamics 365 Business Central, etc. that help keep track of your accounting records and thereby make it easier when it comes time to file your tax returns.

The benefits of using tax and accounting software include:

• Easy automation of payroll, accounting, and tax filing tasks, saving you time.
• Enhanced control and data security.
• Cost savings due to the reduced need for a tax advisor or accountant.
• Automatic identification of tax optimization opportunities, tips and guidance on reducing your taxes.

While tax software and accounting tools are a useful aid in preparing your own tax returns, often the hands-on expertise of a tax advisor is irreplaceable. Those with simpler financial situations, such as full-time employees without multiple sources of income can, in most cases, get by on their own with the use of software tools. For businesses and self-employed entrepreneurs with multiple income streams, high-earning potential, and complex tax requirements, a tax advisor is generally still recommended.