Essential Questions to Ask Your Small Business Tax Accountant

As a new startup or small business owner, the obligation of handling company finances can be intimidating and overwhelming without professional assistance. When reaching out to a small business tax consultant, you want to find a specialist in the startup landscape for your particular sector.

A tax advisor for small business clientele will be privy to the limited resources available, albeit intricate needs. If you're seasoned in working with these experts or even if it's new for you, prioritize making a list of important questions as a starting point.

Maximizing Your Tax Benefits: What to Inquire

Whether you're a small business just starting or a larger corporation, taxes can be a great source of stress. Most new to the process turn to a small business tax accountant to avoid costly mistakes like paying too much in taxes or penalties for noncompliance. With adequate planning, the advisor can work within the tax system to maximize your benefits.

  • Identifying Deductions Unique to Your Business: As a small business owner, an ideal way to save on taxes is with deductions, but this will take the savvy of a tax advisor to avoid being audited. Deductions are also referred to as write-offs with the potential to put you in a lower tax bracket. Your tax accountant can explain what counts as a business expense according to the IRS.

These should not be personal; they must be relevant and necessary for your sector and common in the industry. You can also have credits, which are actions that serve in some capacity, like disabled access, health coverage, or employment opportunities.

  • Strategies for Deferring Income: When you anticipate receiving a sizable payment close to the end of the year, a small business tax advisor should be consulted to find out if rolling that payment into the following year would be wise in your circumstances.

Deferring the income isn't going to eliminate your tax obligation. It's merely putting it off. You could see savings if the business will be in a lower tax bracket or the tax rates go down. Questions to ask a CPA for a small business are how you could otherwise offset the substantial income; one consideration is a business purchase.

  • Understanding the Impact of New Tax Laws on Your Business: Remaining compliant with tax laws is essential to prevent the expense of unnecessary penalties. That means staying on top of which forms need to be filed for your entity and keeping up with the most current tax codes. In the end, new rules and regulations could potentially relieve you of some expense.
  • Planning for Large Purchases and Depreciation: When allowing a large purchase to depreciate into the future, you can take advantage of the deduction for that length of time. Sometimes it makes more sense instead of taking a "one-time deduction," depending on your company's income.

Ensuring Compliance: Key Questions for Your Tax Advisor

As a new small business leader, the company operations are obligated to you but when it comes to the finances, the complexity can be overwhelming. This is when small business tax consulting can be helpful. The tax professional can help establish your business structure if you're just beginning and discern when and how to pay your taxes.

When starting a business, you'll need to be prepared with the right questions to ask CPA so the professional knows where to focus their attention.

  • Staying Current with Changing Tax Regulations: It's critical to question your tax advisor routinely on the tax codes, regulations, laws to ensure there have been no updates or changes. You want to remain in compliance to avoid unnecessary penalties; any changes could potentially be in your favor.
  • Record-Keeping and Documentation Best Practices: In order to file taxes, you need to have good records and documentation. With the possibility of an audit, a paper trail is beneficial. A tax accountant can tell you which records are crucial to have on hand. Some of these include:
  1. Tax returns
  2. Payroll records
  3. Insurance paperwork
  4. Licenses/permits
  5. Operating agreement
  6. Contracts
  7. Receipts
  8. Bank statement/credit card statements
  9. Check registers
  10. General ledger
  11. Financial statements

These should be kept in digital and hard copy in a safe, secure location. The IRS designates a timespan to hold some records while the FLSA- Fair Labor Standards Act decides on the rest. The tax consultant will be able to advise on these time periods.

  • Navigating State and Local Tax Obligations: The first tax season will be overwhelming with many questions to ask a tax accountant for small business regarding your obligations as a new business owner. Any of the following could apply depending on the company.
  1. Estimated taxes
  2. Corporate income taxes
  3. Self-employment taxes
  4. Personal income taxes
  5. Excise taxes
  6. Payroll taxes
  7. Sales taxes
  8. Employment taxes

The tax advisor will work through your company details to discern which applies to you and review the filing and remitting process. It will be a discussion you have regularly to remain compliant as regulations are updated.

  • Sales Tax Considerations: At one point, sales-oriented establishments only needed to concern themselves with sales tax collection for goods and services sold in other states if there was an employee in that state or a physical building or warehouse.

Nowadays, tax laws have been updated to include collecting/paying these taxes if you have so many transactions in a state. Each state is unique in its laws, making maneuvering the sales tax laws a challenge. A tax advisor can be a huge help in keeping you compliant.

  • State Income Tax Requirements: The tax accountant can make filing and remitting taxes much easier. You might need guidance on how much you'll need to have ready to pay out, what expenses qualify for credits/deductions, the documents necessary for tax prep, and on. With the CPA guiding the process, you can rest assured you'll be prepared.

Assessing the Expertise of Your Small Business Tax Consultant

A tax consultant or CPA must undergo extensive education and training, obtain licensing, plus gain roughly two years of experience in order to enter the workforce. The CPA must further continue their education each year to keep up to date on their knowledge and standards.

  • Credentials and Specializations: CPA, EA, or Other Certifications: A CPA- Certified Public Accountant is exceptionally skilled in finances. The professional earns a bachelor's degree with no less than 150 credits, successfully passes the Uniform CPA exam, and gains roughly two years of work experience in public accounting. These professionals can further carry certifications as follows:
  1. PTIN- IRS Preparer Tax Identification Number
  2. PFS- Personal Financial Specialist
  3. CFF- Certified in Financial Forensics
  4. ABV- Accredited in Business Valuation
  5. CITP- Certified Information Technology Professional

These represent specialized areas of accounting that could be relevant to your sector.

An EA- Enrolled Agent successfully passes an IRS-issued exam to become a federally authorized professional in tax matters representing the public with the IRS.

  • Experience with Businesses in Your Industry: Finding a CPA specializing in your small business or working with entrepreneurs in your sector is critical. These professionals will understand the rules and regulations pertinent to your industry and the challenges you face.

You can confirm their expertise with entrepreneurs and small businesses by asking about the business sectors and client base they've worked with, most specifically their level of knowledge of your industry and how they were able to resolve challenges encountered by startups and small businesses.

Building a Strong Relationship with Your Tax Advisor

  • Frequency and Methods of Communication: A successful business relationship begins with an open line of communication ensuring that the professional is well aware when there are any financial or business adjustments or related changes to avoid pitfalls. Communication should be set up on a consistent basis in a format that is easy to maintain for each of you.
  • Expectations for Tax Planning Meetings: Recurring meetings should be set to ensure the business remains on track. With these meetings, the tax professional should be made aware of the business’s growth strategy and the objectives set to work towards this end both sales and financial goals.
  • Understanding the Scope of Services Provided: When you have a better understanding of the tax advisor’s financial expertise, it will seem natural to share your business plan, something that might not be an obvious benefit at the beginning of the relationship.

Financial Strategy and Tax Planning

  • Short-term vs. Long-term Tax Planning Techniques: Short term tax planning could include buying new equipment at the end of the year, a capital expense, to decrease tax liabilities. For a long term tax liability reduction, a business owner could invest in a Roth IRA, retirement planning with tax-incentive accounts.
  • Retirement Planning and Tax Implications for Small Business Owners: Maximizing retirement account contributions like an employee 401k plan can not only allow you to invest for retirement but helps you in the short term to reduce taxable income.
  • Tax-efficient Business Structure Analysis: Reassess your business structure to determine if you can benefit from moving into a different option. Many of the structures including sole proprietors, partnerships, and LLCs don’t pay corporate income tax.

The business’s net income “passes through” to the business leader’s individual returns with the top bracket being 37 percent. For an LLC at the top bracket, a structure change could come with considerable tax savings.

FAQs: Ensuring the Best Financial Strategy with Your Tax Advisor

  • What should I ask a small business tax advisor to ensure the best financial strategy? Learn how the tax advisor approaches their position. The professional should embrace the tax code to keep these lawfully minimized without being overly safe or reckless.
  • How can I evaluate a small business tax consultant's expertise? Confirm the CPAs certifications and expertise. It’s vital to make sure the advisor has the necessary qualifications and licensure along with all additional certifications before hiring them. You will also need the professional to specialize in your sector to be able to handle any challenges you face.
  • What are the critical questions to ask a CPA when starting a business?
  1. What are your structuring options and which is the best choice for a startup
  2. What are your tax obligations
  3. What records will you need to keep
  4. How should you finance
  5. What is the CPAs tax planning methods

Additional Considerations for Selecting a Small Business Tax Accountant

  • Understanding Fees and Billing Practices: A tax account will take a few variables into consideration when assessing fees and billing including
  1. The complexity of your returns
  2. How well you keep records
  3. The time it takes to do the returns
  4. The CPA’s individual fee structure based on expertise, location, and other factors
  • The Role of Technology in Tax Preparation and Planning
  1. Automated tax prep - accounting and bookkeeping
  2. Mobile accounting - working via smartphone technology
  3. AI- Artificial Intelligence - capable of replacing 1st and 2nd year associates
  • Handling IRS Audits and Disputes: The CPA will represent a small business owner in case of audits or disputes with the IRS or you can pursue the services of a tax attorney.

Next Steps After Choosing Your Small Business Tax Advisor

It’s a good idea to select roughly three tax consultants to meet to ensure you establish a rapport and comfortability with one of them, feel confident with their expertise and knowledge within your sector, and feel you can develop a sense of trust.

  • Preparing for the First Consultation: The objective is to interview at least three professionals to ensure one of them has sufficient time to provide consistent service and if they offer adequate expertise to guide you with your limited knowledge.

In order to avoid wasting anyone's time check the professional websites to gather as much information and have as many questions answered upfront as possible. You can also find pertinent questions to pose on online platforms relating to small business tax and IRS aptitude.

A CPA with experience representing a business with the IRS, specifically with audits, is beneficial. It's important to feel confident in your choice, comfortable with their knowledge, and take your time in deciding.

  • Gathering Financial Documents and Records: It's essential to be prepared by calling ahead to see what records you must bring to the meeting. Some ask for a "Tax Organizer" to complete and attach relevant documents they request. This is the most organized approach.
  • Setting Goals and Expectations for Tax Outcomes: Consider at length your financial objectives and tax goals and how this tax professional can contribute to these. With Wilkins & Co. you will be able to share your aim and your fears while taking full advantage of the wealth of knowledge they bring.

This resource will be trusted throughout the year while you operate your small business. As your company expands, the professional will help update your business plan and file all pertinent contracts being diligent about highlighting any red flags along the way.

While the CPA is an incredible asset for taxes, they're well-versed in finances making it crucial that you find one in your sector who offers valuable support for your business ultimate success.

Wrapping Up

A CPA- Certified Public Accountant’s role for the small business is exponential. Wilkins & Co. offers solid guidance on setting goals and helps to develop strategies to meet these objectives for long term financial security and solid business growth.