Looking for Real Value?
Looking for Real Value?
Working With Your Tax Advisor to Go Beyond Compliance
Taxes. The very thought is enough to make most people reach for the Pepto-Bismol. The U.S. Tax Code is close to 4 million words long – seven times longer than War and Peace. Douglas Shulman has said that he hires someone to prepare his taxes because the U.S. Tax Code is so complex. This is not good news – Douglas Shulman was the U.S. Commissioner of Internal Revenue from March 2008 to November 2012.
Taxes have become even more challenging for many in the Marcellus Shale play; whether it’s small business owners who have experienced unprecedented growth, businesses that have expanded into multiple states, or landowners in need of tax planning thanks to new found wealth. All are in need of solid tax advice and should make sure that they’re getting the best service possible from their tax professional.
With April 15 quickly approaching, it may be time to reflect on what your Certified Public Accountant (CPA) should be doing for you.
Defining the Relationship
Finding the right tax advisor may seem daunting, but setting realistic expectations is a good start. Deciding whether you are looking for strictly compliance or a true advisor is critical as you define the relationship upfront. Client relationships tend to sour when the CPA overpromises and under-delivers. Conversely, a client who constantly takes advantage of the relationship will ultimately be disappointed. Above all, mutually agreeing on expectations is absolutely necessary.
Your CPA should be speaking to you throughout the year – not just at tax time. Since 2001, Congress has made nearly 5,000 changes to the Tax Code. That’s more than a change per day. Your CPA should be keeping you informed on tax law changes that directly affect you and your businesses.
Proactive Strategic Planning
Unless you have specifically directed your CPA to focus only on your annual tax compliance, they should be providing ongoing strategic planning. As your situation changes and the Tax Code changes, a proficient CPA will analyze your tax situation with the goal of minimizing your taxes.
Strategic planning might also include a review of the entity structure, determining the feasibility of new product lines and services or expansion into new geographical markets.
They should also be keeping up-to-date on your personal goals. Are you getting married, divorced, having children, sending children to college, transferring your business to an heir? Life situations can have a big impact on your tax liability and financial goals.
Current Tax Issues
Thanks to the American Tax Relief Act of 2012 (The Act), numerous tax credits were extended or renewed for 2013 which could have a significant impact on small businesses and individuals. For example, the tax benefit commonly referred to as the 179 deduction has been dramatically expanded and is available to businesses that meet certain criteria. Basically, a business can deduct up to $500,000 of cost associated with the purchase of new or used tangible personal property placed in service during 2012 or 2013. The deduction is phased out if the business purchased more than $2 million of tangible personal property during the year.
50% Bonus Depreciation is extended through 2013, giving businesses the opportunity to take substantial depreciation deductions during the first year they buy certain fixed assets. The Work Opportunity Credit and Returning Heroes and Wounded Warriors Work Opportunity Tax Credits have also been extended through 2013 and allow businesses to claim tax credits for new hires in certain targeted groups.
If these, or any, of the provisions of The Act apply to you or your business, you should expect your CPA to take advantage of the opportunity to minimize your tax liability.
Reaching your tax professional should not be a difficult process. Yes, this is their busiest time of year, but that’s not an excuse for being unavailable or unresponsive. Ideally, the same person should work with you and be your main point of contact – not whoever is available at the time. They should also be available to meet and strategize with your other professional service providers including attorneys and bankers.
Keep in mind that if you are looking to establish a long-term relationship, you’ll want someone who understands your business inside and out and who will become a trusted advisor in major business and financial decisions. Relationships with tax advisors can be perfunctory or vital. An experienced CPA can help you explore your needs and develop an appropriate course of action. Above all, the relationship needs to feel right – knowing that you have a qualified tax advisor looking out for you can provide incredible value, peace of mind, and ultimately contribute to your success.