6 Essential Questions Every Business Owner Should Ask Their CPA Before Filing Tax Returns

As a business owner, tax season can be both daunting and crucial. Navigating through the complexities of tax regulations while ensuring compliance and maximizing deductions requires careful planning and expert guidance. This is where a Certified Public Accountant (CPA) becomes an invaluable asset to your business. However, not all CPAs are created equal, and it’s essential to ask the right questions to ensure you’re getting the best advice for your specific needs. Here are five essential questions every business owner should ask their CPA before filing tax returns:

What Tax Deductions Am I Eligible For?

Understanding the deductions available to your business can significantly impact your tax liability. Ask your CPA to thoroughly review your business expenses and identify all eligible deductions. This includes expenses such as operating costs, marketing expenses, rent, utilities, employee salaries, and more. Additionally, inquire about any recent changes in tax laws or provisions that may affect your eligibility for certain deductions.

What Needs to Be Represented On My Balance Sheet vs. Profit & Loss?

Many business owners don’t have a good understanding on what the difference is between a balance sheet and profit & loss statement. But for accountants and bookkeepers, this is vital to truly representing the overall value of your business going forward. Based on strategic tax liability decisions and business valuations, it makes more sense to list various expenses as items on your balance sheet versus your profit & loss statement. That’s why it’s good to double-check with your CPA and bookkeeper to confirm that you have every business activity for the past year in its right place.

What Records Should I Keep Throughout Each Year?

Another way to ask this question is, “How can I help make your job easier?” Proper record-keeping is essential for accurate tax reporting and audit defense. Ask your CPA and bookkeeper to provide guidance on the types of records you need to maintain and the best practices for organizing your financial documentation. This may include invoices, receipts, bank statements, payroll records, depreciation schedules, and other relevant documents. Implementing an efficient record-keeping system can streamline the tax preparation process and mitigate potential errors or discrepancies. Nowadays, this can be managed very easily because of 21st century’s cloud technology and quick, mobile communication for scanning and sharing vital record-keeping.

How Can I Better Plan for Tax Liabilities This Next Year?

Effective tax planning goes beyond mere compliance; it involves strategic decisions to minimize tax liabilities, optimizing financial decisions and setting aside necessary funds for quarterly or annual tax payments to eliminate large tax bills at the end of a tax season. Your CPA should be able to provide proactive advice on tax planning strategies tailored to your business goals. This may include recommendations on retirement plans, investment opportunities, timing of expenses, entity structure optimization, and other tax-saving strategies. Collaborate with your CPA and bookkeeper to develop a customized tax plan that aligns with your long-term financial objectives.

Should I Consider Making Any Structural Changes or Business Investments This Year?

If business owners are proactive and talk with their CPA on at least a quarterly basis, they can inform them about potential moves they would like to do throughout the year. Then, the CPA can give tax implication feedback on whether or not those moves really make a difference to their tax liabilities throughout the year. Plus, if the CPA is proactive and willing to help, they will give you updated details about how much you should owe so that, for instance, if you meet with them in October, you have two more months to do strategic tax moves to lower tax liabilities for that year!

This follows right along with the question before, about planning for taxes and it also goes to this next question!

How Do You Suggest I Keep in Touch With You Throughout the Year?

Tax season may be the most critical time for tax-related matters, but tax planning and compliance are year-round activities. Inquire whether your CPA offers year-round support and advisory services to address your ongoing financial needs. A proactive CPA will not only assist you during tax season but also provide strategic advice and guidance throughout the year. Whether you have questions about business decisions, financial planning, or regulatory changes, having a trusted advisor by your side can provide peace of mind and help you navigate complex financial matters effectively.

Partnering with a knowledgeable and proactive CPA is essential for ensuring tax compliance, optimizing financial outcomes, and achieving long-term business success. That being said, you need to be a smart, proactive business owner to ask the right questions and not “assume” that everything is being done adequately with your finances. This is why many business owners decide to work with a team like ours! 

By asking the right questions and actively engaging in tax planning discussions, business owners can maximize deductions, minimize tax liabilities, and position their businesses for growth. Take the time to collaborate with your CPA (and our team!) to develop a customized tax strategy that aligns with your goals and objectives. With the right guidance and expertise, tax season can become an opportunity to enhance your financial health and secure a brighter future for your business.

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