Tax season is upon us! Now’s the time of year where you and your CPA sit down and strategize on how to actually keep those hard-earned dollars.
But are you getting the most out of your relationship? In this article, you’ll see nine empowering questions you can ask your tax planning professional. By running through them together, you and your CPA can lay the foundation for more efficient planning this season and next.
1) How Can I Make Your Job Easier?
CPAs are invaluable team members in keeping your business alive and thriving. But their ability to help you depends on the information you provide. By asking how you can make things easier on them, you open up the conversation for a more collaborative relationship.
Your CPA might tell you that:
- There’s a better way to keep track of tax information
- There’s a more efficient way of sharing critical documents
- There are certain decisions you should consult them on before making
2) How Can I Improve My Cash Flow Management?
Cash flow is the money that goes in and out of your business. Understanding it is essential for making better financial decisions, and keeping things running smoothly. Your accountant can provide valuable insights into how you should handle it moving forward.
Talking with your CPA about cash flow can:
- Clarify your business’s cash flow patterns
- Identify areas of risk as well as priorities for improvement
- Figure out the bottlenecks in your business operations
- Create an understanding of where your businesses is heading
3) Can I Take Advantage of Tax Loss Harvesting?
Tax loss harvesting is a strategy that can help reduce your tax bill if you’ve sold investments at a loss. It’s possible to leverage these losses to offset potential capital gains and income in the current and/or future tax years. And it can be a smart move for business owners looking to minimize their tax burden.
That said, there are numerous risks and benefits associated with selling securities at a loss. There are also several rules surrounding tax loss harvesting that need to be considered before utilizing the strategy.
It’s worth running through the pros and cons of tax loss harvesting with your CPA . They’ll help you determine if it’s a financial move that makes sense. If it does, they’ll also be able to advise you on timing and frequency when selling your investments to help you maximize tax savings, and keep you compliant with all relevant tax regulations.
4) What Business Expenses Can I Deduct?
Business owners know every dollar matters. By asking your CPA the right questions about your business expenses, you can identify additional deductions, minimize your tax bill, and free up cash flow to reinvest in your business.
Here are some specific expenses worth running by your CPA:
Home Office Space: Working from home has become a new norm since the pandemic. But not everyone is leveraging the home office tax savings they may be eligible for. Speak with your accountant to see if you qualify for savings.
Charitable Giving: Your CPA will provide valuable insights into how you can make a bigger impact on the causes you care about. That’s because they’ll expose you to the various gifting strategies and vehicles (ex: QCDs, Donor-Advised Funds, etc.) you have at your disposal that will allow your money to go farther.
Phone and Internet Usage: If you use your phone and internet for specifically business purposes, you can deduct the expenses incurred. And in situations where you use them for a combination of personal and professional reasons, you can look to claim the portion of the cost that pertains to your business activities.
Business-Related Travel: Numerous entrepreneurs accumulate points on their travel credit cards with the intention of utilizing them for business flights later on to cut costs. However, this may not be the best approach since business travel expenses can be completely written off as a business expense, while personal travel expenses cannot. It’s worth asking your CPA what travel you can deduct. Be sure to ask about savings opportunities traveling via car as well.
Healthcare Premiums: Individuals with a personal health plan (rather than a group plan) who pay healthcare premiums from their own funds without receiving tax exemptions or subsidies may be eligible to deduct those premiums from their taxable income. Please note, this can be impacted by your business structure type as well.
5) How Should I Pay My Estimated Taxes?
If you’re a business owner, paying estimated taxes may be a necessity. Estimated taxes refer to the process that individuals use to pay taxes on income that isn’t subject to withholding taxes.
Some examples of income that are not subject to withholding and might require you to pay estimated taxes are dividends, interest income, stocks sold at a gain, and income earned through self-employment.
It’s best to consult with your accountant to determine if, and how you need to make estimated tax payments every quarter. This will prevent you, and your business, from being blindsided by unexpected payments. Additionally, your accountant can assist you in filing and remitting estimated taxes to the appropriate parties.
Effective tax management involves proactive tax planning and a clear understanding of the sources and amounts of taxes being withheld from various income sources, which can influence the estimated amount of taxes that may be required to be paid.
6) Am I Leveraging The Best Business Structure Type?
Each business structure comes with its unique set of regulations concerning taxes and legal liability. An accountant can give you an in-depth explanation of each structure, helping you select the one that best suits your business. Furthermore, they can assist you in filling out the necessary paperwork to establish or change your legal structure.
Here are the brief descriptions of the advantages for various business structures:
Sole Proprietorship: This type of business structure is not considered a separate legal entity, and the owner reports business income and losses on their personal tax return. Sole proprietors are entitled to certain deductions and credits, such as home office expenses and
self-employment tax deductions, which can lower their tax liability.
Partnership: Partnerships are also not taxed as separate entities. Instead profits and losses are reported personal tax returns of the partners. Partnerships can deduct business expenses such as salaries, bonuses, and contributions to employee benefit plans, which can reduce the tax burden for the partners.
Corporation (C Corp): C Corps are separate legal entities, which means they are subject to corporate taxes on their profits. However, C Corps can deduct business expenses, such as salaries and benefits, which can reduce their taxable income. Additionally, owners of a C Corp do not personally hold liability for business-related debts or legal issues, which can be a significant advantage for them.
S Corporation (S Corp): Like C Corps, S Corps are separate legal entities. However, they are taxed similarly to partnerships or sole proprietorships, with profits and losses reported on the owners’ personal tax returns. This pass-through taxation can be advantageous for S Corp owners, as they can avoid double taxation on their profits.
Limited Liability Company (LLC): LLCs provide a unique benefit of limited liability protection similar to corporations, combined with pass-through taxation. The business income and losses of LLC owners are reported on their personal tax returns, along with the ability to reduce their tax liability by deducting business expenses. Furthermore, LLCs can select the most suitable tax category for them, either as a sole proprietorship, partnership, or corporation, providing them with greater flexibility.
7) Are There Industry-Specific Strategies Applicable to Me?
Certain tax regulations are industry-specific, such as excise taxes in the alcohol industry or freight taxes in the shipping industry. These regulations, along with industry-specific grants, subsidies, and deadlines, can significantly impact your business.
Your CPA can help you understand the laws that apply to your industry and advise you on how to comply with them. They can also help you identify tax incentives, credits, and deductions that your business may qualify for.
8) Are There Recent or Upcoming Tax Changes That Will Impact My Business?
Business accounting standards and IRS regulations are subject to frequent changes that can significantly impact your business. But as a business owner, it can be really difficult trying to stay up-to-date on the latest changes while handling all of your other responsibilities.
For example, with the recent passing of the SECURE Act 2.0, there have been a slew of retirement changes. Its changes include, but are not limited to, what employers will have to offer, how they can match their employee contributions, and what tax credits they may be eligible for
Fortunately, you’re not alone in trying to keep your head above the tax waters. Ask your CPA for a helping hand in staying afloat amidst the sea of changes. They’ll be able to better understand how these changes might affect your tax obligations, financial reporting requirements, and other aspects of your day-to-day business activities.
How Snowpine Wealth Can Help You Further
At Snowpine Wealth, we’re not looking to replace your CPA. We’d actually love the chance to work alongside them. Financial advisors and CPAs can work together to provide you with a comprehensive strategy to save on taxes across your lifetime.
CPAs are fantastic at identifying tax savings each calendar year. But as a CFP® Professional, Ryan Smith can help you spot ways to reduce your liability continuously as you work a financial plan towards retirement.
If you’re looking to make the most of your tax savings this year, and for years to come, don’t hesitate to reach out. We’d love the chance to meet your CPA, or put you in touch with one inside our professional network. To get started, call us at , or schedule a free appointment.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services not offered through Commonwealth Financial Network®.