While it’s certainly not the most dreamy part of running a solo business, tax management is an important and necessary aspect of self-employment.
Of course, you can always enlist the help of an accountant to handle your taxes for you. However, accountant fees can be steep—and it’s hard to justify the cost if you’re just getting started or your taxes are relatively straightforward.
Fortunately, there are two other options you can consider: automated tax management or going the DIY tax route. The first involves using specialized, automated tax solutions to put all of your bookkeeping and tax management on autopilot, while the other means relying on your own smarts, systems, and sweat to keep your taxes in order.
Trying to figure out which one is the right fit for your solo business? Let’s take a closer look at each option—including the pros and cons.
Many freelancers and solopreneurs choose the do-it-yourself (DIY) method for taxes, especially if their income sources and finances are relatively simple or they enjoy working with numbers.
DIYing your taxes means using tax software (like TurboTax, H&R Block, or QuickBooks) and spreadsheets to track all of your income and expenses, make your quarterly estimated payments, and file your taxes completely on your own. Even with the software, you’re doing a lot of manual work in the form of inputting data, tracking due dates, and making payments.
The biggest perk of this approach is that it’s cost-effective. If you decide to use relevant tax software, you’ll pay for that—but you’ll still save on hefty accountant fees.
With that said, managing your taxes takes time and effort. You’ll need to invest at least some of the hours you could spend on billable client work into keeping track of your finances (which probably isn’t your favorite aspect of business ownership). Not to mention, tax codes and forms can be complex and stressful.
| Pros: | Cons: |
| ✅ Cost-effective | 🛑 Complex |
| ✅ Complete control | 🛑 Time-consuming |
Now let’s talk about automated tax solutions (like Lettuce). These systems handle all of your routine tasks like tracking your income and expenses, generating reports, and even submitting your quarterly payments and filing your annual tax return.
After some quick initial setup of the solution, you get the peace of mind that your finances and taxes are being taken care of for you—without you needing to lift a finger.
You’ll pay a subscription fee for the software, but it usually ends up being cheaper than keeping an accountant on retainer. Plus, it often pays for itself in saved time and smart strategies that help you lower your tax bill.
You can think of an automated tax solution like having an always-on digital accountant. It minimizes errors, maintains your compliance, offers expert-backed guidance, and checks off all of your tax-related tasks while you focus on running your business—saving you plenty of hours, hassles, and headaches.
| Pros: | Cons: |
| ✅ Saves time and stress | 🛑 Subscription cost |
| ✅ Minimizes errors | 🛑 Reliant on third-party provider |
| ✅ Smarter tax planning (and savings) | 🛑 Initial setup |
Like anything else, each option comes with its pros and cons. Ultimately, you’ll need to consider your unique preferences and strengths to land on the approach that’s the best fit for your solo business.
Need a little more help? This comparison chart breaks down the major differences between automated tax solutions and DIY taxes so you can get a better idea of the best match for you.
| DIY: | Automated Solutions: | |
|---|---|---|
| Cost: | Free or very low | Pricier: Costs range from $0 to $200+ per month depending on features and needs |
| Time Investment: | High: You need to do everything manually | Low: Some initial setup before everything is handled automatically |
| Learning Curve: | High: You need to understand tax laws and codes | Low: The solution does it all for you (or offers step-by-step guidance) |
| Risk of Errors: | Higher: You are responsible for inputs and accuracy | Lower: Solutions include built-in checks and guidance |
| Support: | Moderate: You’ll need to find answers yourself or rely on tax software’s support | Hands-On: Proactive guidance and personalized support from tax pros |
| Tax Savings: | Low: You’ll need to be proactive about finding ways to lower your tax obligations | High: The solution can offer tips and strategies to help you reduce your tax burden and be smarter about your solo business’s finances |
Automated tax solutions come out as the winner in a lot of categories, but that doesn’t mean DIYing your taxes is inherently bad. It can be the right move for solopreneurs who are just getting started, enjoy working with numbers, or have relatively straightforward finances.
But, as your business grows and your tax needs become increasingly complex, opting for automated tax management can streamline your processes, ensure you do things right (and on time), and help you put more of your time and energy where it belongs: serving your clients and growing your business.
Ready to explore how an automated tax and accounting platform can take the pain out of managing your business finances? Take a look at Lettuce today.
| DIY: | Automated Solutions: | |
|---|---|---|
| Cost: | Free or very low | Pricier: Costs range from $0 to $200+ per month depending on features and needs |
| Time Investment: | High: You need to do everything manually | Low: Some initial setup before everything is handled automatically |
| Learning Curve: | High: You need to understand tax laws and codes | Low: The solution does it all for you (or offers step-by-step guidance) |
| Risk of Errors: | Higher: You are responsible for inputs and accuracy | Lower: Solutions include built-in checks and guidance |
| Support: | Moderate: You’ll need to find answers yourself or rely on tax software’s support | Hands-On: Proactive guidance and personalized support from tax pros |
| Tax Savings: | Low: You’ll need to be proactive about finding ways to lower your tax obligations | High: The solution can offer tips and strategies to help you reduce your tax burden and be smarter about your solo business’s finances |