There continues to be a lot of noise in the news and business media on the tax reform (actual name “the Tax Cuts and Jobs Act”) and every week there is another seminar, webinar, or conference to try and educate both professionals and business leaders on its intricacies.
From a practical real-world point of view business owners, CEOs of private companies, and family business executive management are often unclear as to what the tax reform really means for them or even where to start the conversation. The 1st step needs to be to call your CPA, accountant, auditor, tax preparer, controller, tax attorney, whoever is your current go-to professional for tax and accounting matters and begin a conversation. Do not wait for them to contact you.
Ask them what effects your business directly and what may potentially affect your business as the implications of the changes in the tax code are clarified. Most tax and accounting firms and professionals are extremely busy, make sure you get the time you need by speaking with your service provider now. Income taxes are not something to be left until later in the year.
The 2nd step is to explicitly and specifically ask about tax planning and tax strategy opportunities for your business in 2019 and 2020, now. Planning and strategy require time both for the actual development of the plan and time for the plan to be put into place and have impact. All too often a business owner or manager believes they’ve hired complete tax management services when they have only hired preparation of the tax returns / forms. Do not get caught in the trap of “but they do our taxes”. Yes they prepare your Federal and state income tax returns. That by no means at all implies they are doing tax planning or tax strategy. Some tax professionals only prepare the return, nothing more.
Minimizing a business’ income tax bill requires much more than only deducting all the expenses for any particular calendar year. Many tax concepts carry over several years. Tax credits may not at all be obvious when preparing a tax return and may require a discussion of the company’s business plan, budget and capital expenditure / investment in machinery, plant or equipment etc. (often called CAPEX). The tax law itself changes over time even with no act of Congress or the President.
Tax planning and tax strategy typically pays for itself while allowing the business owners to sleep better knowing that opportunities to be tax efficient are being taken advantage of and tax risk is being minimized. Have an open conversation with your tax professional before the month is over and begin the process.
Best,
Middle Market Advisory LLC
Originally published January 9, 2019