For most businesses, the end of tax season brings a sigh of relief—along with a desire to avoid anything tax-related for the next 11 months or so. But business owners who have a CPA or other neutral third party review their tax situation mid-year are in a far better position to make strategic, tax-efficient decisions about the direction of their company. In this blog, we’ll discuss some of the benefits your business can gain by scheduling a mid-year tax review with a Certified Public Accountant (CPA).
Aid in Estimated Payments
Making estimated tax payments throughout the year can be the bane of any business owner's existence. And failing to re-evaluate the amount of these payments before each one is made can mean major surprises when tax season rolls around.
Getting a refund as a result of excessive estimated payments can initially seem like a positive—but that refund is money that could have been put to better use if it had remained in your business's reserves during the year. And, needless to say, making estimated payments throughout the year and learning that you still owe money once Tax Day rolls around can be a major blow.
Analyzing your year-to-date revenue, expenditures, and likely tax deductions halfway through the year can help you tweak your last two or three estimated tax payments to better match your overall business tax liability. In most cases, you'll want to aim for a tax liability of as close to 0 as possible, although some situations call for a more customized approach.
Reduce Tax "Sticker Shock"
Seeing your business's tax bill in black and white can be jarring, even if estimated tax payments prevent you from having to pay this amount in one fell swoop. But remaining mindful of your tax total throughout the year can minimize sticker shock and spur you to reduce this bill as much as you can.
And just as staying on top of your estimated business tax payments can prevent you from receiving a surprise tax bill, working with a CPA to determine your overall tax liability for the current year and plan tax strategies for future years can transform your business into a lean, mean, tax-efficient machine. In an increasingly competitive business environment, taking advantage of targeted tax strategies can be the difference between turning a tidy profit and barely staying afloat.
Help Tweak Your Tax Planning
The more revenue your business can shield (legally) from federal and state taxation, the more funds it has on hand to reinvest in itself—for instance, increasing employee salaries, creating additional positions, or investing in technology or machinery destined to make your business more profitable. This means that adopting a "set it and forget it" tax strategy that doesn't account for fluctuations in revenue or changes in tax law could be leaving money on the table.
Reviewing your business's financial situation periodically (particularly mid-year, while there is still time to make changes) can give you the information you need to implement strategic decisions that will reduce your tax liability both now and in the future.
This is also why it's so important to work with a tax planner, not just a tax preparer. Just about anyone with a bit of training can fill in your information on a tax form, but a CPA can help you decide what to do with that information and how it can be leveraged to achieve your business's financial goals. Scott Boyar, CPA, PLLC, provides detailed tax support for businesses and individuals, working with you to evaluate how your business tax decisions ultimately fit into the big picture.