Is Your Tax Relationship Really Providing Value?
Evaluating the Value Your Tax Relationship is Providing
When you hire the help of a professional – be it a doctor, a lawyer, or a CPA, for example – the overriding expectation is that as professionals, they will provide the guidance, support and expertise you need.
But that’s not always the case.
In fact, many times as a business owner, when it comes to one of your most trusted financial allies – your tax CPA – you’re relegated to taking lead on the relationship. The relationship and subsequent service are often reactive and require you to take initiative to manage and coordinate. And when you are forced to lead the relationship, you could end up with costly surprises, or worse yet, fail to receive critical strategic advice.
The best offense is a good defense so the more proactive you tax-planning approach is, the more likely you can quickly, appropriately and accurately as deadlines approach.
And with changing tax laws, it proves even more critical to have a tax partner that can help you navigate their complexities. After all, if it’s new and unfamiliar terrain to them, it’s almost certainly foreign to the uninitiated business owner.
But it doesn’t – and shouldn’t – have to be that way.
A New Way to Find a Tax Partner
We’re in a unique position to serve as a liaison to ensure that our clients the get the service and results they deserve from their tax CPA. We know great tax providers so we can make the right recommendation for our clients, too.
So until you can find The One, here are a few things you should expect from your tax partner.
1. New Tax Laws.
There’s really no two ways about it: The new rules are complicated. But one of the most important provisions is the deduction for qualified business income or QBI. The deduction for qualified business income allows a deduction for up to 20 percent of QBI from partnerships, limited liability companies (LLCs), S corporations, trusts, estates, and sole proprietorships.
The deduction is based on an ‘artificial’ calculation of business income instead of actual economic outlays required for most other business deductions, providing a significant tax benefit for many noncorporate businesses. So if your tax professional isn’t telling you about QBI, you’re missing out. Significantly.
2. Tax Advantages.
One hidden and immediate source of cash for many small to midsize companies is the R&D Tax Credit which creates a significant reduction to current and future federal and state tax liabilities.
A dollar-for-dollar credit against taxes owed or taxes paid, nearly every successful company is potentially eligible for an R&D tax credit of some amount, with more than $7.5 billion in federal R&D Tax Credit benefits given out annually. Additionally, businesses can take the credit for all open tax years, typically the last three or four years and the current year, with additional years available if your business is in a net operating loss or alternative minimum tax position.
3. C Corporation Consideration.
Once upon a time, in a not-so-distant past, most businesses were more likely to be advised to be a pass-through entity versus a C corporation – but times have changed. Because where once C corps weren’t a great structure as businesses would be taxed twice, under the new tax laws, its tax rate is so low it may make more sense now.
It’s important to note that making the switch is not a quick decision, which is why a good tax strategist proves critical. And without a proactive tax professional, you may not be advised appropriately – or at all.
4. Tax Advice.
This last consideration paints with a broad brush stroke but encapsulates the larger issue with tax consultation: Getting reactive – rather than proactive – tax leadership from your tax provider. If your tax professional provides run-of-the-mill, end-of-year, down-to-the-wire tax service that leaves you scrambling to file extensions while being surprised by what you owe, it’s time for a change.
You need – and deserve – the support, guidance and transparency of a tax professional that will proactively ask you all the right questions, offer you the most financially sound expert advice and pore through each and every opportunity to save you money and keep your business in flawless financial standing.
The Bottom Line For Your Business Bottom Line
Where once business owners could settle for status-quo tax relationships, the new tax laws call for those partnerships to be scrutinized. And with taxes, unless you are a tax professional, you simply don’t know what you don’t know, making it even more critical to have a tax partner who not only knows what you don’t, but has you and your business’s best interests at heart.
How CFO Alliance Can Help with Business Tax Concerns
CFO Alliance can serve as the link between your business and your tax professional with a proactive approach and relationship to help shoulder the weight of making sure things are done right, the first time and every time.
Knowledge is power, so make sure your tax provider is proactively addressing these concepts and more with you, and if they’re not, let us help you find someone who does.