As a business owner, tax is not merely a once-a-year task—it’s ongoing planning that can significantly impact your bottom line. You and your CPA are a team. Lean on your CPA to navigate the complexities of the tax code to maximize your savings and ensure compliance. Here are ten crucial questions to ask your CPA and help you achieve ultimate tax savings.
Proactive tax planning involves anticipating and organizing your financial affairs in a way that minimizes your tax liabilities. This strategy goes beyond merely filing your taxes accurately—it’s about looking ahead and planning for future tax scenarios.
If you choose to engage your CPA in tax planning, your CPA should conduct regular reviews of your financial statements and business operations throughout the year, not just at tax time. This includes analyzing changes in tax laws, assessing how these changes impact your business, and advising on strategic decisions to minimize your tax burden.
By being proactive, you can take advantage of tax-saving opportunities and avoid costly surprises. Proactive planning can lead to significant savings by identifying deductions, credits, and other tax benefits well in advance.
Deductions and credits are essential for reducing your taxable income and overall tax liability. Deductions lower your taxable income, while credits reduce the amount of tax you owe.
Your CPA should be well-versed in available deductions and credits applicable to your business. This includes industry-specific deductions, as well as general business expenses. They should also stay updated on new and expiring tax provisions to ensure you’re taking full advantage of what’s available.
Maximizing deductions and credits can result in substantial tax savings. For example, claiming deductions for business expenses like office supplies, travel, and employee benefits can significantly lower your taxable income.
The structure of your business (e.g., sole proprietorship, partnership, LLC, corporation) can have a significant impact on your tax obligations.
Your CPA should evaluate your current business structure and determine if it’s the most tax-efficient. They might recommend restructuring your business to take advantage of more favorable tax treatments. For instance, electing the tax designation of S-Corporation can provide tax advantages for certain types of businesses.
The right business structure can lead to lower taxes and better liability protection. By choosing the optimal structure, you can benefit from specific tax provisions designed for different types of entities.
A sole proprietor might save on self-employment taxes by forming an S-Corp and paying themselves a reasonable salary.
Yearend tax planning involves making strategic decisions at the end of the fiscal year to optimize your tax position.
Discuss with your CPA if yearend tax planning is right for you and what the process will entail for your specific business. It may include an in-depth analysis complete with a tax planning checklist. Items that may be discussed are deferring income, accelerating expenses, and making last-minute purchases that qualify for deductions. They should also advise on retirement plan contributions and other tax-deferred investments.
Effective yearend planning can make a significant difference in your tax liability. By implementing strategies before the year ends, you can ensure that you’re in the best possible position when it’s time to file your taxes.
A comprehensive financial review involves a thorough analysis of your financial statements and tax returns to identify areas for improvement.
Your CPA should offer regular reviews of your financial health, including your income statement and balance sheet. They should look for trends, anomalies, and opportunities to improve your financial standing. This review should may also include an assessment of your tax strategies and their effectiveness.
A comprehensive review helps ensure that your financial practices are aligned with your tax planning strategies. It can uncover inefficiencies, highlight areas for improvement, and ultimately lead to better financial management and tax savings.
Estimated tax payments are periodic advance payments on your annual tax liability. They are required for individuals and businesses that do not have taxes withheld from their income.
Your CPA should calculate your estimated tax payments to avoid underpayment penalties. This should be provided to you with your tax filing. Remember, it is unlikely your CPA will not make these estimated tax payments on your behalf as it is your responsibility to pay the IRS. However, your CPA should be able to guide you through the entire process.
Accurate estimated tax payments can prevent costly penalties and interest. It also helps manage cash flow by spreading out tax payments throughout the year.
Retirement planning involves setting up and contributing to retirement accounts to secure your financial future and take advantage of tax benefits.
Your CPA should help you choose the right retirement plans, such as 401(k)s, IRAs, or SEP IRAs. They should advise on contribution limits and the tax benefits of each plan.
Retirement plans offer significant tax advantages, such as tax-deferred growth or tax-free withdrawals. Proper planning can reduce your current tax liability while securing your financial future.
Business questions arise within the realms of legal, human resources, international tax, R&D tax credits, and regulatory compliance. If your CPA does not have the professional experience themselves, they should be able to have you navigate the complex web of industry professionals.
Your CPA should be your trusted guide. If they do not have the answers to your specific situation they should be able to refer you to trusted industry partners and experts and provide their professional guidance through the process.
As a business owner it is important to not feel alone. Your CPA should be your first call as a trusted guide.
By focusing on these eight crucial areas, your CPA can help you achieve significant tax savings and improve your overall financial health. Make sure your CPA is proactive, knowledgeable, and engaged in your business’ financial planning. If they’re not, it might be time to find a CPA who can truly maximize your tax benefits and support your business growth.
At Tentho, we are here to support you on this journey! Schedule a chat with our team today.