Simon CPAs | Accounting and Tax Blog

Navigating the complexities of tax laws can be challenging for business owners and individuals alike. While it may be tempting to handle tax matters independently, hiring a professional tax advisor can offer significant advantages. Here’s a closer look at the benefits of working with tax professionals and when it’s essential to seek their expertise.

Advantages of Hiring a Professional Tax Advisor

• Expert Knowledge and Experience: Tax professionals possess specialized knowledge of current tax laws, regulations, and compliance requirements. They stay up-to-date with changes in legislation and can help you navigate complex tax issues effectively, ensuring you’re informed about the latest deductions and credits available.
• Maximizing Deductions and Credits: A tax advisor can identify potential deductions and credits that you may not be aware of, helping you reduce your tax liability. Their expertise ensures that you take full advantage of available opportunities, potentially saving you significant amounts of money.
• Personalized Tax Strategies: Every business and individual has unique financial situations. A tax advisor can create tailored tax strategies that align with your specific goals and circumstances. This personalized approach can enhance your overall financial planning and long-term success.
• Avoiding Mistakes and Penalties: Tax laws are intricate, and even minor errors in tax filings can lead to costly penalties and audits. Professional tax advisors are meticulous in their work, minimizing the risk of mistakes and ensuring compliance with all tax obligations, thus providing peace of mind.
• Time Savings: Preparing taxes can be time-consuming, especially for busy business owners. Hiring a tax advisor allows you to focus on running your business while they handle the complexities of tax preparation. This time savings can translate into improved productivity and efficiency.
• Audit Support: In the event of an audit, having a tax professional on your side can be invaluable. They can represent you, handle communications with tax authorities, and ensure that all necessary documentation is prepared, reducing stress during what can be a challenging process.
• Financial Planning Support: Beyond tax preparation, many tax advisors offer broader financial planning services. They can help you plan for future tax liabilities, retirement, investments, and estate planning, ensuring a holistic approach to your financial health.

When to Seek Professional Help

While it’s beneficial to have a tax advisor for most businesses and individuals, there are specific situations when their expertise is particularly crucial:

• Starting a New Business: Understanding the tax implications of different business structures and setting up proper accounting practices is vital for new business owners.
• Significant Life Changes: Events such as marriage, divorce, inheritance, or the birth of a child can impact your tax situation, making it essential to seek professional advice.
• Complex Financial Situations: If you have multiple income streams, investments, or assets, a tax advisor can help you manage these complexities effectively.
• Ownership of Rental Properties or Investments: Tax implications for real estate and investment income can be intricate; professional guidance can optimize your tax strategy.
• Preparing for an Audit: If you receive notice of an audit from the IRS, consulting a tax advisor immediately is crucial for navigating the process.
• Major Changes in Tax Law: Following significant tax law changes, seeking advice can ensure that you’re compliant and taking advantage of new opportunities.

Conclusion

Hiring a professional tax advisor offers numerous benefits, from maximizing deductions to providing personalized strategies tailored to your unique situation. While some may choose to handle their own taxes, the expertise and support of a tax professional can lead to substantial financial savings and peace of mind. If you find yourself facing complex tax issues or significant life changes, consider enlisting the help of a qualified tax advisor to ensure your financial success.

Small businesses can take advantage of dozens of tax deductions to reduce what they owe the IRS at tax time. In this article, we share seven top deductions that you may not know about but should.

1. Property rent

If you rent a location for conducting business, you can deduct your rent payments as a business expense. Remember, even if you run a business from a home office, that is not an eligible “property rent” expense for your business. Home office deductions should be made under that category.

2. Software subscriptions

If you purchase or subscribe to business-specific software, those purchases or subscriptions are deductible as miscellaneous deductions under “other business expenses.” 

3. Marketing

You can deduct expenses from marketing your business through promotions or paid advertising. Some examples of deductible marketing expenses are sending mailers to potential or current customers, running a paid social media campaign, buying signs or banners to display at your business, printing business cards or brochures, print advertising, website development, and logo design. There are many more, so consider anything you do to market your business 100 percent deductible.

4. Entertainment

If your business requires you to entertain clients or guests, the IRS allows you to deduct part of those expenses. Entertainment includes clubs, bars, sporting events, restaurants, hunting or fishing events, a hospitality suite or booth at a conference, and more. While you do not have to close a deal or make a sale to claim these entertainment expenses, you must ensure they are exclusively related to your business. 

5. Professional fees

Any professional fees that you pay directly related to your business are deductible. For example, a cleaning crew for your storefront business, an attorney that handles your legal paperwork, or the services of an accountant or CPA that manages your finances – those fees are all deductible. 

6. Employee gifts

You can gift your employees up to $25 per employee per year, which is 100 percent deductible. So, if you want to provide a holiday gift card, a bouquet of flowers for your personal assistant, or send a special birthday treat to those who work for you, it’s a win-win!

7. Taxes

While it may not seem logical, some taxes you pay for your business are fully deductible. This includes state and local income taxes. Employer taxes and state unemployment taxes are also fully deductible.

These seven small business deductions are just the tip of the iceberg regarding some not-so-obvious deductions that may be eluding you! Check with your accountant or CPA to ensure you are reaping all the benefits of your small business.

Tax season doesn’t have to be a nightmare for small business owners. If you own a small business, note the following tips to help you survive the upcoming tax season.

1. Prepare in advance!

Even if you’re not as prepared as you’d like for the current tax season, you can always resolve to be prepared for next time. Start now by making sure you read the remaining points listed here. For starters, you can begin today by keeping meticulous records, accurately taking inventory, and familiarizing yourself with all the deductions that apply to your business.

2. Separate business and personal finances.

Business and personal financial records do not mix. This is one of the most common stumbling blocks for small business owners. The best advice to ensure no discrepancies is to open separate business and personal accounts. That means checking, savings, and credit card accounts. Keep one set for business and one established for personal use. This approach prevents having to sift through every transaction for the year when tax time rolls around.

3. Keep meticulous records.

No matter what records they are, make sure to keep them meticulously. Store them in a physical file or use a digital receipt tracker for expenses. Keep a well-organized invoicing system, either paper or electronic. Keep track of all charitable contributions, gifts or bonuses given to employees, and quarterly tax payments made. At tax time, you will have all the information you need right at your fingertips.

4. Prepare for payroll taxes.

If you are an employer with staff, you must report, withhold, and pay employee taxes. For each employee you are required to pay social security, Medicare, and federal income taxes. Your accountant or bookkeeper should keep up with this, or the payroll agency you use to calculate payroll should handle it. Either way, these are required by law and must be paid.

5. If you have inventory, track it.

If your business has a physical product (i.e., inventory), you must know how much you have on hand come tax time. You must report your business’ inventory value, which is the dollar amount that you have tied up in unsold merchandise that you are holding. Some companies use inventory management software or a POS system to manage this, as it can be tedious and time-consuming if performed manually.

6. Understand your deductions.

To correctly evaluate your expenses as deductible, you must familiarize yourself with the IRS’s deductible guidelines for small businesses. If you travel as part of your business, there’s a guide, too. Deductions can get tedious. It is often best to have a reliable accountant familiar with your business to help you navigate those rocky areas.

7. Make retirement contributions.

If you’re looking for end-of-year deductions, why not fill your coffers and plan for retirement? Add to your IRA or 401(k), as any contributions you make are tax deductible. The same goes for contributions made to employee retirement accounts.

8. Donate to charity.

Another great way to garner additional deductions is through your business’s charitable contributions. It’s a win for you on taxes, and it’s a win for the charity, too!

9. Give year-end bonuses.

Rewarding employees with end-of-year bonuses can benefit you at tax time. Bonuses and employee gifts (there are limits, so check those with the IRS guidelines) are tax deductible. Again, this is another way to do some good and save on taxes.

10. Hire a qualified accountant or CPA.

The best way to know you are saving as much as possible on taxes is to hire a qualified tax accountant or CPA. They are up to date on tax laws and deductions and can easily guide you through the seemingly endless numbers when tax time comes. The price you pay them is also another deduction!

When interest rates rise, many small businesses feel the pain. Here’s a look at the potential impact on small businesses and some steps they may need to take to ensure their viability.

Prepare for a Decline in Sales
Paying more interest to lenders can leave customers with less disposable income, forcing them to cut back on their spending. This, in turn, will reduce sales and earnings for many businesses. Businesses that sell luxury goods and services may be hit particularly hard since consumers typically cut back on these items first.

Anticipate Paying More for Business Loans
As rates rise, it will become more expensive for your company to borrow money. A review of your company’s current debt payment schedule and future borrowing needs can help you analyze the potential impact of higher rates on your company’s finances.

Reevaluate Expansion Plans
If you had plans for expanding your physical or online footprint, you may have to reconsider. The additional expenses involved in financing the expansion combined with a decline in consumer spending could make any plans for expansion less feasible.

Focus on Cash Flow
Although the direction of the economy is difficult to predict, it may be smart to look for areas where your business can reduce expenses to conserve money and build up its cash reserves. Your business could also see if it can renegotiate some loans, especially those with variable interest rates.

Tighten Accounts Receivable
Some of your customers may respond to rising interest rates by waiting longer to settle outstanding bills. If you experience an uptick in customer payment delays, you may need to tighten your payment systems so that customers are billed immediately after receiving goods or services and are then contacted every 10 days or so with a new bill. Consider adding late charges after nonpayment beyond 30 days.

A period of rising interest rates is uncharted territory for many small businesses. It can help to have the input of an experienced financial professional as you try to navigate challenging times.