According to a recent survey from the National Small Business Association, 50 percent of small businesses in the U.S. spend more than 40 hours a year managing their federal taxes. Add in the passing of the Tax Cuts and Jobs Act in January, and small-business owners may need to rethink their usual approach when it comes to tax preparation.
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Though this tax season might seem especially daunting, you don't need to face it alone. In fact, 85 percent of small businesses hire outside help from a tax practitioner or accountant to handle their taxes, says the NSBA Small Business Taxation Survey. There are some quality consultants available and online tools you can leverage to navigate the latest tax laws, providing you with valuable time to focus on other financial and customer growth opportunities that come from running a company.
Below are my tips, as well as insights from LinkedIn ProFinder financial experts we spoke with in February in a series of phone interviews, for small businesses looking to take a smart approach to taxes on a long-term basis.
Financial advisors should be your No. 2.
When it comes to hiring the help you need to be successful with your taxes, you should consider bringing someone aboard to help beyond just the standard tax season months. Having an accountant involved on a month-to-month basis to review financials and talk strategy, especially with the recent tax legislation posing new opportunities and complexities, can mean the difference between a stressful tax season, and an easy lift.
Betty Chen, outsourced controller/CFO at Pegasus Tax + Accounting, said it perfectly: "Many business owners don't realize that accountants should be their No. 2 in a business, period. Because they record the transactions of your business, they are key to the past, present and future of the company's financial standing, which will come in handy during tax season."
Tax season is a busy time for most financial advisors, and with the new tax law, 2018 is already shaping up to be especially busy. On LinkedIn ProFinder, our platform connecting small-business owners and freelancers, we found accounting-related RFPs more than doubled in January 2018 compared to January 2017. So, don't wait until the last minute to bring in help!
Find the expert who knows the ins and outs.
With this in mind, it's clear that when you bring on a financial advisor you need to make sure you do your homework. Take a look at some of her past clients and recommendations -- who she has worked with in the past can shed light not only on the quality of work she delivers, but if she knows your specific industry's regulations.
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If you are considering bringing on a CPA or accountant, you might want to take your detective work a step further and check him out online and make sure he really does have the licenses he is claiming. "Our profession is very heavily regulated," says Steve Rabin, a certified public accountant (CPA) from San Francisco. "For additional peace of mind, business owners can visit the National Association of State Boards of Accountancy and check that any person or firm offering accounting services is currently licensed by the state board in the state where that accountant is based."
Well-versed in tax compliance and tax law, CPAs can help explain extremely important distinctions between category filings like an LLC, S-corp and C-corp while an accountant, even just as a consultant, can help keep your finances in order year-round.
Tax technology can be a time saver.
Thankfully it's the 21st century, which means you have access to a number of apps, tools and websites that can simplify tax preparation.
In fact, Mariya Luqmani, president and CEO of Mlcpas Inc. and a CPA from New York, who specializes in international taxation of individuals and businesses, has gone completely paperless in her consulting practice and says even the minutes saved when avoiding a fax machine or photocopier make a difference for her clients when it comes to preparing taxes.
Related: 5 Ways Small Business Owners Can Spend Their Tax Savings
Use tools like Skype or BlueJeans to set up face-to-face virtual meetings with your financial advisor to save you on commute time. When it comes to breaking down your expenses, think about software solutions from QuickBooks, Xero or TaxJar to do the heavy lifting and to help you understand how much you can deduct based on the amount you've spent. If you're looking for quick tax information on the go or need to calculate taxable income for different filing statuses consider IRS2Go or Bloomberg BNA's Quick Tax Reference App.
Adopting technology could not only guarantee you a more accurate filing, it could actually save you money.
A little tax planning can go a long way when it comes time to file. Given how much you already have on your plate running a business, think about getting assistance from a financial pro year-round who can be trusted to translate the new laws, as well as take advantage of technology that is here to help, whether it be specific tools or simply narrowing in on resources available. Making smart, strategic financial decisions for your company this tax season gives you the freedom to focus on growing your business and making sure your customers are happy. A win-win for everyone.