Tax Preparation — Making Sense of Your Bottom Line

Tax Consultant Stephen Nance, with DrillDown Solution, and Dean Steinman, President of Ortho Marketing recently got together to discuss planning and tax preparation. Among the topics, they discussed specific challenges presented with the COVID-19 pandemic. Note: The Ortho Marketing podcast will be available for listening at the end of this article. As a MAcc and CPA, Mr. Nance is an expert at sorting through the bureaucratic framework to find tax credits, rebate programs, and additional tax incentives. Many new programs were put in place to assist businesses in operation during the nationwide pandemic. With that in mind, it is more important now than ever before to consult with a tax expert.

 

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Why Hiring a Tax Specialist Makes Sense

Hiring a tax preparation specialist and consultant makes sense for every business. To emphasize the reasoning behind this recommendation, Mr. Nance added three main tips for anyone wishing to avoid tax anxiety.

Plan Ahead

Tax planning is not just having a good CPA do your taxes every year, hoping they will know how to lower your taxes just by the way they do your return. The truth is once the calendar year is over, there is very little you can legally do to affect your taxes. The last thing you want is a surprise on April 15 that you owe a huge chunk of money to the government. If you meet with your tax advisor before the year is over, at least once if not multiple times, and project your income and taxes, you’ll be able to make decisions on tax strategy and plan ahead for cash flow.

Think Long-Term

It’s important to plan ahead for the tax year, but it’s also important to look ahead to the future. When do you want to retire? What’s your tax plan for retirement? Also, as mentioned previously, there’s a good chance taxes will increase in the near future, so when planning this year’s taxes, consider how your decisions will affect next year.

Avoid Tunnel Vision

Sharing his personal experience, Mr. Nance elaborated on a common tax mistake for business owners: “As a tax advisor, I love to share new tax-saving strategies with my clients or with potential clients. I love it when I can turn a balance due into a refund. Since I live in a tax world, sometimes I’m surprised when people don’t understand basic strategies like IRAs, HSAs, 401ks, depreciation, or self-employed health insurance. “It’s even more exciting when I can educate my clients on more exotic strategies like the credit for increasing research activities, captive insurance, conservation easements, or cash balance defined benefit plans. But my job isn’t just to save my clients’ taxes but to help put them in the best financial position possible. “Oftentimes, what’s best for taxes is not what’s best for the overall financial picture. For example, people often want to buy a new vehicle or tons of new equipment before year-end in order to get the tax break. That can certainly work to reduce taxes, but is that what’s best for you or your practice? “New vehicles lose their value the moment you drive them off the lot (At least in a normal year that’s not 2021), and a new vehicle and new equipment are going to cost more than what they are worth to you in tax savings. Plus there’s a significant possibility of tax rates going up in the future, possibly even next year, so it may be worth it to save those big equipment purchases for when you’re in a larger tax rate. “Personally, I’d rather make money and keep 60% of it (Of course I’d rather keep 100%) than not make money or give it all away just to not have to pay taxes.”

Tax Preparation Without the Anxiety

Sorting through the bureaucratic rules of tax preparation can be overwhelming. As a business owner, you have more important areas to concentrate on, which is why hiring an outside tax professional is a perfect solution.

 

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Reach out to DrillDown Solution by email at: info@drilldownsolution.com for information on reducing your tax preparation anxiety. Listen to the entire podcast: Listen to “OM Ep. 115: Making Sense Of Your Bottom Line With Stephen Nance, VP of DrillDown Solution” on Spreaker.