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Bad Recipe for Small Business: Seeking Tax Advice in April

Running a business is difficult. There’s never a shortage of responsibilities. You may be pushing off those tasks that aren’t urgent today in order to focus on what must be done this minute. With tax advice for your small business, however, waiting until April is simply a bad recipe.

When it’s time to file your return for last year’s work, any advice you receive now can usually only be implemented moving forward. Also, many tax preparers are basing their advice solely on your activity over the past year. Unfortunately, this advice often isn’t retroactive, and it pertains to damage that might already be done. It likely won’t have any impact on your tax burden this April.

Tax advice of this nature is equivalent to receiving the blueprints for a home that you’ve already attempted to start building. Trying to apply such advice is frustrating, costly and often impossible.

Useful tax-saving tips focus on planning and taking advantage of opportunities to save over the next year. Because tax law and your business are prone to change, your tax strategy might even evolve from now until year-end.

The Implications Of Your Business Decisions

Every decision you make as a small business owner has tax implications. You need to understand what impact your decisions are going to have when it comes to tax filing.

Some examples of activities and decisions that affect your tax burden include:

• Classifying your business structure
• Buying or leasing equipment
• Whether to make big purchases this year or next
• How to handle unsold inventory
• Compensating your employees and self

Eliminate Crippling Tax Surprises

If you wait until April to seek tax advice for your small business, you run a much greater risk of discovering surprises at the onset of tax-filing season. When business owners meet with their tax consultant, they often assume that their taxes are complete. They don’t expect to owe any additional money. But, because of some of the decisions they made through the year, they may wind up owing a large sum of money – far more than they anticipated. If you’re unable to pay your taxes by the filing deadline, you could be in jeopardy of suffering large penalties and high interest rates.

If you meet with your tax advisor throughout the year, you know exactly what to expect when it’s time to file. Eliminate the stress of being caught off guard by seeking advice from your tax partner proactively.

More Than Tax Advice: Compliance

Meeting with your small business tax advisor throughout the year is important – not only for creating a tax plan that highlights tax-saving opportunities, but also for ensuring that you avoid costly compliance penalties. If you misclassify an independent contractor, for example, there are steep penalties to be paid, which could really hurt the health of your business.

Because compliance regulations can change at any point over the course of the year, you simply can’t afford to wait until April to learn what’s different from the previous year. You need to know about these changes as they occur and adapt immediately.

The more often you keep in contact with your tax advisor, the better. Best practice is to check in with your partner on a monthly basis. And if something changes that impacts your business, he or she should let you know as soon as this occurs.

The most valuable tax advice derives from speaking with someone who knows your business thoroughly. For your advisor to understand your situation and your business, you must communicate frequently. With such year-round attention and communication, your small business is much better off.