Business owners never stop preparing for taxes
We all know the old saying: if you fail to plan, you plan to fail. This is true in business. It seems that most people let out a collective sigh after April 15th. This is not true with business owners. If you are running a business and you are only spending 30 minutes a year with your CPA, you are doing it wrong. This statement is bold but proves to be true. Tax planning is crucial for your business. Outlined are some areas that should automatically trigger tax planning with your accountant. (If your accountant is not available for tax planning, maybe it is time to find a new one.)
- Highs or lows in income/expenses. Your accountant is most likely thinking your business is on the same steady course. This is simply not true. If you are making large purchases, it is best to see if there’s a way to make that cost-effective. If you are experiencing a record month in income, it is best to call and make sure that you are reserving money.
- You’ve hit the “lottery” of real estate. You always hear about how much people make on deals, but not how much they truly make. This is the same with the lottery. You hit the jackpot and you’re excited, but guess what? The IRS is ready. When you hit the lottery with a real estate deal, guess what? The IRS is ready. You cannot truly know how much you make from a deal if you don’t know your tax burden. Not all deals are made during tax season, so it’s best to strategize with your accountant when the deal is happening. This will give you the net profit of the deal opposed to not knowing your tax bill.
- Getting on track. What do I track? This is a question that is common for a CPA to hear. You should focus on tracking any expense that can be deemed ordinary and necessary by the IRS. If you go out and buy a case of Red Bulls because you need energy, that is not a deduction. This is not ordinary or necessary. If you travel to a property and purchase material for a rehab, that is a deduction. It is both ordinary and necessary. We recommend that you check in with your CPA quarterly to make sure you are tracking expenses correctly.
At the end of the day, your business is your business. A good CPA will essentially turn into a strategic partner for you. It is imperative to find a CPA with the time and the knowledge to make sure you are doing things correctly during the year.