Questions with tax implications are giving business owners headaches:
- How to get forgiveness for PPP loans and what are the tax implications?
- Should we defer payroll taxes as recently announced?
- And companies with either extraordinary gains or losses this year are asking what are the tax implications?
Please, seek advice and counsel from your tax advisor. These questions are too important—and have a huge impact on the company’s cash—to wait.
In my role as a strategic business advisor to private growth-minded companies, I see how tax decisions impact the ability to achieve their goals. It is from that point of view that I’m sharing my recommendations.
Tax decisions affect cash
Cash is your company’s Superpower.
Cash allows you to:
- Pay your bills, employees, and taxes
- Spend on short-term enhancements for customers and clients
- Hire outside providers to relieve pressure on internal staff
- Expand horizontally to new product or services lines
- Expand vertically to control more of your supply chain and distribution channels
- Acquire another company for strategic growth
Cash and tax decisions are tightly connected.
Tax regulations are often different for individual industries or sub-industries. As tax experts will tell you, this is complicated! It is incumbent on you to acquire the right tax advisor to deal with the uniqueness of your industry and your company.
The right tax advisor will also understand your company’s strategic and profitable growth goals and align tax approaches to those goals. For example, there legal ways to reduce taxable income (EBITDA) but those ways also take cash out of the business. (It doesn’t disappear, it is just no longer available for the company to spend.) This might not be the right tax tactic for your company now.
Review your tax decisions annually. Things change, sometimes quickly, and what worked last year may be inappropriate for this or the coming year. Perhaps an expansion opportunity unexpectedly appears, and you want to go for it. Perhaps your personal financial, family or health situation changes and that impacts your tax approach.
Taxes may be certain, but how you approach them is not at all a one-time decision.
How Different Types of Tax Preparers Can Help
Tax return preparers, whether a solo practitioner or a large tax prep chain, will give you the basics that comply with tax regulations but nothing more. There won’t be a discussion about your company goals and how tax approaches should work in concert with them.
Enrolled Agents (EA). An EA is licensed by the IRS and has passed a difficult test or worked at least five years for the IRS. You’ll get excellent current tax advice as they keep up with sometimes head-spinning IRS changes. They could also help your company ensure that bookkeeping processes support your tax return preparation.
Certified public accountant (CPA). CPAs are licensed and regulated by each state. They can perform sophisticated accounting and business-related tax work and prepare tax returns. Businesses with significant growth goals or with complex business tax returns benefit from advising by CPAs. Do not limit your use of CPAs to tax returns.
Many CPAs choose to become deeply knowledgeable about the full range of complex tax compliance and tax implications in one specific industry. A company will benefit from a CPA Specialist who can ensure compliance while working towards your strategic and profit goals.
Tax attorneys are lawyers with a special tax law degree (called an L.L.M. in taxation) or a tax specialization certification from a state bar association. They’ll help if you have a tax problem, are in trouble with the IRS, or need legal representation in court.
Tax attorneys do much more than trouble shoot. They provide additional benefits for business and estate planning. They understand how tax decisions affect the company’s legal situation, including partnerships, shareholders, investors, etc. An estate tax lawyer will give advice on how tax decisions for the company affect the owner’s estate and company value.
Cash Accumulation Requires Spending Some Cash
Spending for the best tax advice that is right for your company is money well-spent. It’s exceedingly difficult and expensive to recover from tax and legal mistakes. That cost directly reduces the company’s cash.
Consider your tax advisor a crucial member of your business family. Ask for an annual review of tax advice and discuss potential changes. If you can’t ask, you might end up in trouble. If you do ask and are disappointed with the answers, you might need to make a switch. If a provider recognizes that you need advice that he or she can’t give, and refers you to someone else, your original provider deserves a huge thanks (and referrals.)
If you are a tax advisor and you’re not initiating annual reviews and making recommendations that further the client’s strategic and profit goals, why not?
When we consult with a company, we look at the whole company including how tax decisions affect achieving the company’s strategic goals. We’ll guide you to the right kind of tax advisor if needed. Visit Money Matters: Cash, Profits, Growth, Taxes, Costs to discover catalysts for your own company growth. Call or text 703-801-0345 to schedule a discovery call.
Wondering what happens in a discovery call? You’ll tell me where you are today and where you want to go—or what you want to avoid in the future. We’ll converse as if you’re a fee-paying client—there will be no surprises once we are formally engaged. If we agree we’re a good fit, we’ll determine the specific outcomes you’ll want and when. And then we work out an engagement that makes that happen. Ready to call or text? Here’s my direct number: 703-801-0345