Four Year-End Tax Questions to Ask Your CPA

Your CPA isn’t just there to ensure that the numbers add up on your tax returns. They can also provide useful advice on how to manage your income for the year and estimate your tax liabilities going forward. A qualified and knowledgeable CPA can also give you insights to help guide crucial decisions about the future of your business and your financial goals. 

For business owners, the end of the tax year often means rushing around, gathering paperwork and taking stock of what is happening in your business. Wrapping up your annual accounting is more than just preparing taxes. It is an excellent opportunity to take an in-depth look at what is happening in your business so that you can improve in time for next year. 

Here are four questions to ask your CPA as you wrap up this year’s finances.

What Does My Tax Liability Look Like?

One of the most crucial things your CPA can do for you is to analyze your income and determine the best financial strategy to keep your tax bill at a minimum. The first step in that process is understanding how much you can expect to pay. The 2018 tax law changes have led to many significant changes for LLCs and sole proprietors in particular. Ask your CPA how your liability is changing and what you can do to lower your payments in the months to come. 

Your CPA may recommend changing the legal structure of your business to take advantage of specific deductions and opportunities for limiting expenses. If you think that you might be in a different tax bracket this year, discuss your situation and weigh your options with your CPA. A lower tax bracket, for example, may allow you to defer any year-end bonuses to January 2020 to keep your tax liability lower. 

How Can I Estimate Quarterly Payments for Next Year?

Small businesses and entrepreneurs are required to pay their tax bill quarterly. The more prepared you are to pay your bills, the less of an impact these costs will have on the flow of business. Speak to your CPA about how much you can expect to pay quarterly in 2020. The amount will depend on an estimate of your total income for the year ahead.

If you believe that your income next year will change significantly, it may be a good idea to ask your CPA what you can do to reduce your tax payments. This may help to keep more money available for business needs in the coming year. 

What Can I Do to Better Manage Cash Flow?

As your CPA examines your receipts and financial documentation, they may be able to share insights into your current cash strategy. In some cases, they may be able to give advice on how to improve your cash flow management to take better advantage of business resources. 

CPAs are masters of cash flow. They understand how you can spend money to make money, and what sort of investments you can make to ensure that your cash flow remains positive each year. Consult with your accountant about your current financial health, and what you can do to adjust your strategy to suit your goals for the year ahead. 

What Lessons Can I Learn From Last Tax Season?

Many of the conversations you will have with your accountant will be focused on best-practice strategies for growth and planning for the future. While you’re discussing steps to improve your cash flow in the year ahead, don’t forget to ask your CPA about lessons you can learn from the last tax season to improve moving forward. 

Because your accountant may have years of experience working with different businesses, they’re in an excellent position to give you advice on how to upgrade your tax standing in the years to come. They’ll be able to discuss things with you like payments, deductions, and record-keeping, and point out the areas where you can improve. Your CPA may also be able to give you advice on how to take advantage of additional deductions in the next year. 

While taxes are just one part of running a business, the time you spend discussing your future and liabilities with your CPA at the end of the year can help set you up for continued success. Remember that your CPA is brimming with expertise, so leverage their professional perspective to help you make decisions to grow your business.

If you need more specialized advice in legal tax matters, ask your CPA to refer you to a trusted tax attorney who can support you from a legal standpoint.

Here at Milikowsky Tax Law, we act as a partner and value-added resource for CPAs when business owners need to navigate complicated tax law issues such as IRS audits, California state EDD audits, back taxes, tax law investigations, and more. If you have questions about a tax law matter, reach out to our expert team today.

The information contained on our website and in blogs is provided for information purposes only and does not constitute legal advice.

Resources:

https://www.caltaxadviser.com/tax-law/

https://www.nolo.com/legal-encyclopedia/how-the-new-republican-tax-bill-affects-businesses.html