4. Engage a great tax preparer who goes to bat for you
Remember the lessons above about good bookkeeping? The same wisdom applies to your tax preparation. This task is an important opportunity to save tax dollars. Treat it as such by hiring someone who will work hard—and smart—on your behalf.
Recall the last time your taxes were done by a professional. If, having just met you, that person prepared and filed your taxes in an hour for $150, you might feel confident…at first.
But the feeling that you “scored” a cheap and easy exchange will give way to curiosity:
- • “Did my tax preparer score all the deductions I deserve?”
- • “Why doesn’t my tax preparer ask me any clarifying questions?”
- • “Shouldn’t there be more collaboration involved?”
- • “If my tax preparer didn’t ask any questions, does that mean they made some assumptions?”
- • “Aren’t there any flags they noticed that I should know about?”
Curiosity gives way to the desire to improve. Because sooner or later, all business owners realize that a tax professional should assure you they’ve done the job correctly and in a way that most benefits you.
The short-term benefits of a more proactive, quality tax prep service
Upgrade from the most basic tax preparation service, and you’ll see immediate short-term benefits. First, you’ll get someone who knows what they’re doing and why. You’ll have an ally who saves you short-term money in the form of averted fees and deserved deductions.
“Last year, I helped a guy that has a few different entities,” recalls John. “He was looking to switch to us. His last tax preparer had done everything correct on his tax return, but they had his business entities separate. He was paying quite a bit in tax. So, we looked at it—in our proposal process—and I told him, ‘You could make this aggregation election and treat them all the same and you save $13,000.’” To say John’s new client was happy would be an understatement.
“He was paying quite a bit in tax.
So, we looked at it—in our proposal process—and I told him, ‘You could make this aggregation election and treat them all the same and you save $13,000.’”
The long-term benefits of a true tax prep pro
While the immediate benefits of upgrading your tax services are exciting, the same move saves you money in the long term, too. How? Most notably, by caring about and tracking basis.
Basis is—in the simplest terms—what something is worth at any given time. It’s your “skin in the game.” A cumulative measure of basis can help you save substantial tax dollars in many common scenarios (like buying or selling property or claiming damage for insurance).
Consider the story of the Oklahoma couple whose property sustained tornado damage. The loss should have been tax-deductible, but the IRS claimed that the taxpayers hadn’t accurately valued the property’s new (now diminished) value. Thankfully, the tax court disagreed with the IRS—a huge relief to the couple. However, sadly, the couple couldn’t prove their basis in the property, which meant they could not deduct the damages after all.
A good tax accountant will help you track basis, so you’re always poised to prove your skin in the game.
A Tax Director’s Top 7 Tax Strategies for Small Businesses in 2021 is written by firstname.lastname@example.org (Eddy Hood) for www.ignitespot.com