Need to Create a Business Tax Plan? How to Work With Your CPA

Have an Honest Conversation With Your Accountant.

Ask your CPA whether they have the knowledge and resources to create a tax plan that will provide recurring savings. If they can’t do it in-house, do they have a network of professionals they can tap? If the answer is no to both questions, find another accountant or be content to pay them to merely fill out and file documents for you.

Know What You Want to Accomplish With a Tax Plan.

Do you want to preserve working capital, build wealth outside your business, obtain equipment to help expand capacity or create new capabilities, or something else? It’s not enough for business owners to tell their accountants they just want to pay less taxes. Be specific. If you and your spouse have different goals, strike a balance between them so you can present a clear objective.

Consider the example of a wife who owns a small business with annual gross revenue of $15 million and net income of $2 million. She keeps pouring money back into the company. Her spouse, meanwhile, worries that the $200,000 they’ve saved outside the business isn’t enough to support them if economic conditions unexpectedly slow. In that instance, a tax planning accountant can develop an asset-protection strategy that will help the couple build and keep wealth outside the company using a variety of tools, including life insurance.

Start the Tax Planning Process Well Before Year’s End.

Initiate discussions about a tax plan for the current year by September or October. Don’t wait until December. By then, accountants won’t have the time to put a plan in place and effectively implement it. It will have to be deferred until next year.

Make Sure Your Business’ Accounting Records Are Up to Date.

I talk to many small-business owners who can rattle off how much revenue they’ve collected year-to-date, but they don’t know their current net profit. That’s because they haven’t taken the time or spent the money to organize their finances. Hire staff, invest in technology, whatever it takes. Without current data, your accountant can’t create an accurate and appropriate tax plan.

Have a Strong and Capable Back Office.

A supportive and smart administrative staff can collect the necessary information. This is the single most important factor in helping your accountant to develop a tax plan because it markedly improves the success rate. Your team must be savvy about cash flow and cash reserves.

Follow Through.

Respond to emails, make the phone calls to recommended vendors — do all the necessary tasks to execute the plan. A strong back office can help here as well. I put clients in touch with vendors to execute strategies, but many times they don’t follow up.

I had one client who owed $500,000 in taxes last year. He wasn’t happy about that, so I gave him a plan for this year and explained the strategy. Months later, he still hasn’t contacted the vendor I recommended to help execute the plan. Time is running out.

Be Prepared to Pay.

It could cost your business thousands of dollars to pay your accountant for a tax plan, but a good one will deliver savings that are four to five times that amount. This should not be looked upon as an expense, even though its cost is deductible as a business expense. Rather, you should regard it as an investment that, if executed properly, will yield a valuable return.

Don’t assume. It’s worth your time to ask if your accountant will suggest forward-looking tax strategies. And it’s worth the investment to follow through.

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