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Manage your Business’s Tax Cost & Tax Preparation

Your Business Needs Professional Guidance to Manage its Income Tax Costs

Here's why -- taxes are another cost of doing business that you need to manage. In fact, tax costs are probably one of your business's five largest costs. Tax costs erase a large percent of your business's net profits. This can result in missed profitability targets, and unexpected cash shortages when your taxes are due. My Firm can provide the guidance you need so you can better manage your business's tax costs. Consider these facts:

  • Unless you have a unique situation such as a loss carryforward, tax costs can erase anywhere from 20% to 45% of a business's net profit.
  • If you are considered a self-employed sole proprietor or partner (including most LLC members), you probably also need to plan to pay self-employment taxes on every dollar of net profit -- whether or not you draw the profits out of the business. Self-employment taxes can use up to 15% of the business's net taxable income.
  • The tax "vendors" (the IRS, state and local governments) do not send you invoices showing you the tax costs accumulating during the year. Without invoice, the business can easily forget about its tax costs. Furthermore, the business is responsible to calculate and pay sufficient amounts of taxes during the year by certain due dates, in order to avoid underpayment penalties and large balances due when they file their tax returns. If you end up with large balances due or underpayment penalties, the result could be an unexpected cash shortage. Just as bad, if you pay too much in taxes during the year, you could create an unnecessary cash shortage.
  • The net income per your business's financial reports is not necessarily similar to the business's net taxable income. You need professionals like my Firm to "convert" the net income per financial reports to net taxable income, so you can plan the cash needed to pay taxes when they become due.
  • You need a professional to advise you of the tax laws that you can take advantage of to make your net taxable income lower, thereby decreasing the cash needed for taxes.

How Does My Firm Help You to Manage your Income Tax Costs?

  1. From financial information your business provides, we can calculate and advise you about the estimated cash the business will need for each tax due date. We will look for opportunities to defer the use of cash until the final due date, without creating underpayment penalties.
  2. During the year, we will advise you of tax planning ideas as we become aware of them. My Firm stays current on tax laws via continuing education and subscribing to multiple tax newsletters, including a daily subscription to Thomson Reuters RIA Checkpoint tax research software. Also, my Firm shares resources and expertise with other CPA firms, giving us the resources available to larger firms.
  3. Before each year-end, we often work with our clients to project the taxable profit through the remainder of the year to estimate the cash you may need for taxes. If you are underpaid, we will advise you of the estimated cash you will need by the final due date. If you are overpaid, we will suggest paying less for the final estimated payment for the tax year. We will also look for ideas to reduce taxes and help you to implement them before the year-ends. Businesses must implement many tax-saving strategies before their tax year ends.
  4. As we look to save taxes, we look at future years as well as the current year, to find the best approach that pays the least tax overall. For example, if your business experiences a modest year, it may be better to defer deductions to next year if you expect your business to return to a higher tax bracket.
  5. We seek to avoid your receiving tax notices, and being selected for tax audit. To prepare your business's tax returns, we use a high-quality tax program, Lacerte software. This program allows us to automate the preparation of all forms so that numbers properly cross-reference to each other. Lacerte also provides comprehensive diagnostics to address compliance issues. We also have a comprehensive tax library that includes access to a high-quality tax research software, Thomson Reuters RIA Checkpoint. This tax research software not only provides tax law, but it also provides us with taxpayer-friendly tips and observations we can employ on your behalf.

  

If you want to learn more about how we help you to manage your business's tax costs, please call Jim Blowers at (518) 344-6087. My initial consultation is free!