Hopefully, since tax time is upon us, you have already set up an appointment with your advisor or accountant. For any company, big or small, a tax professional is an essential investment, says Greg Tanner, partner at Scottsdale, Ariz.-based Morici & Tanner PLLC. “You need to make sure you are handling your financial affairs as efficiently as possible.”
Tanner, a certified public accountant (CPA) and certified financial planner, says there are a lot of old wives’ tales in the tax business. “If you try and do them on your own, you might do something incorrectly based on a false assumption from a previous tax experience.”
He also cautions against using a bookkeeper that isn’t CPA-certified. “A CPA is bound by the state’s board of accountancy rules and regulations whereas a bookkeeper is not.” Most state boards have a mission to protect the public’s welfare by ensuring that only qualified people and firms are licensed to practice public accountancy. They also establish and enforce standards of competency and practice.
Securing a good tax advisor is easy: just ask friends or owners of other like businesses, as the industry is really based on word-of-mouth recommendations, says Tanner, who also suggests calling your state’s Board of Accountancy or the Better Business Bureau for referrals. He says as a jobber or distributor, you can request someone with previous industry experience.
A tax advisor is important because they make recommendations on your insurance policies and all potential write-offs, as well as your tax-deferred savings plans. If you are a small business, a tax advisor may be all you need, but if you start growing in revenue and complexity, it may make sense to hire an accountant who can handle much more than just your taxes.
According to Tanner, an accountant is also responsible for taking care of payroll, bookkeeping and budgeting. A tax advisor simply “analyzes tax situations and comes up with strategies for decreasing tax liability.”
A good accountant can make the difference between a large refund or no refund at all. They need to have the skills of a detective, constantly looking at ways to decrease your liability. They should be knowledgeable in your industry, and keep you apprised of new tax laws and provisions that may potentially impact your business. They should also respond quickly to your concerns and ask you numerous questions regarding new business strategies and plans for major business purchases.
“You should contact your tax accountant before a transaction that’s more than $5,000,” suggests Tanner, adding that the tax provisions are constantly changing and will therefore affect what business equipment or machinery a company can claim. Some recent changes include the following:
- A new company can deduct $500 the first year they are in business for startup expenses.
- The expensing of $100,000 worth of business equipment per year has been extended through 2007.
- As of Oct. 22, 2004, the deduction for vehicles that are classified as 14,000 pounds gross vehicle weight or less will be limited to a $25,000 write-off.
Though you can pay for service by the hour, Tanner warns not to get into a situation where you are paying “every time you pick up the phone.” Closely review all your options. A typical monthly fee for a small business is $200, though costs are contingent on a business’ size and complexity.
For more information, log on to www.moricitanner.com.
