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Creating a Business Tax Plan: A Step-by-Step Guide for Working with Your CPA

Two people looking at a business tax plan

Creating a Business Tax Plan: A Step-by-Step Guide for Working with Your CPA

January 9, 2023

Two people looking at a business tax plan

peakreliance

Accounting, CPA, Taxes

I. Introduction

A. Importance of a Business Tax Plan

A well-designed business tax plan can help a company achieve its financial goals while staying compliant with tax laws. It allows a business to identify potential deductions and credits, evaluate tax liability, and plan for tax payments. By proactively addressing tax considerations, a business can minimize its tax liability and maximize its cash flow.

B. Working with a CPA

Working with a certified public accountant (CPA) is an important aspect of creating a comprehensive and effective business tax plan. A CPA is a trained professional who has the expertise to guide businesses through the complex tax laws and regulations. They can provide advice on tax-saving strategies and help ensure compliance with tax laws. A CPA can also help a business stay current with changes in tax laws and regulations, which can be a significant benefit in today’s rapidly changing tax environment. By working with a CPA, a business can develop a tax plan that is tailored to its unique needs and goals.

II. Identifying Business Tax Needs

A. Understanding Business Financials

The first step in identifying a business’s tax needs is to understand its financials. This includes reviewing income statements, balance sheets, and cash flow statements to gain an understanding of the business’s revenue, expenses, and profitability. A CPA can assist in this process by providing guidance on financial statement analysis and identifying any potential issues or areas for improvement. By understanding the financials, a business can make informed decisions about its tax strategy.

B. Determining Potential Deductions and Credits

Once a business has a clear understanding of its financials, the next step is to determine potential deductions and credits. These can include deductions for business expenses such as rent, equipment, and employee benefits. There may also be tax credits available for certain types of businesses or specific business activities. A CPA can assist in identifying these deductions and credits, which can help to minimize the business’s tax liability.

C. Evaluating Tax Liability

Evaluating the business’s tax liability is an essential step in identifying tax needs. This involves assessing the business’s current and projected income tax liability and determining if any tax planning strategies can be used to reduce it. Factors to consider include the business’s profitability, expected growth, and potential changes in tax laws. A CPA can provide guidance on evaluating tax liability, and use their knowledge of the tax laws to give advice on how to minimize the tax burden on the business.

By understanding business financials, identifying potential deductions and credits and evaluating tax liability, business owner will get a clear picture of the business tax situation which will be the starting point for next step in the process: developing the tax plan.

III. Developing the Tax Plan

A. Setting Financial Goals

A key aspect of developing a business tax plan is setting financial goals. This includes determining the business’s short-term and long-term financial objectives, such as increasing revenue, reducing expenses, and improving cash flow. Setting these goals will help the business to focus its tax planning efforts and ensure that its tax strategy aligns with its overall business strategy. A CPA can provide guidance on goal setting and help ensure that the goals are realistic and achievable.

B. Planning for Tax Payments

Once financial goals have been established, the next step is to plan for tax payments. This includes determining the business’s tax liability and determining the best way to meet that liability. This can include planning for estimated tax payments, or taking advantage of tax deferral opportunities. A CPA can provide guidance on tax payment options and assist in developing a plan that meets the business’s financial goals while complying with tax laws and regulations.

C. Implementing Tax-saving Strategies

Implementing tax-saving strategies is an important aspect of developing a tax plan. These strategies can include taking advantage of deductions and credits, utilizing tax-advantaged investment opportunities, and planning for retirement. A CPA can provide guidance on the various tax-saving strategies available and help the business determine which ones are most suitable for its specific circumstances. These strategies can help a business to minimize its tax liability and maximize its cash flow.

By setting financial goals, planning for tax payments, and implementing tax-saving strategies, the business will be able to optimize its tax situation to reach its objectives and be in a good position for the next step: implementation of the plan.

IV. Implementing the Tax Plan

A. Communicating with the CPA

Effective communication is key to successfully implementing a business tax plan. A business should establish regular communication with its CPA to ensure that both parties are aware of any changes to the business’s financial situation or tax laws that may affect the tax plan. A CPA can provide guidance on the best way to communicate financial information and answer any questions the business may have. By maintaining open and regular communication, a business and its CPA can work together to ensure the successful implementation of the tax plan.

B. Keeping Accurate Records

Another important aspect of implementing a business tax plan is keeping accurate records. This includes maintaining detailed records of income and expenses, keeping accurate books and records, and keeping track of all financial transactions. Accurate records are essential for both compliance with tax laws and for demonstrating the accuracy of financial information to the CPA. A CPA can provide guidance on record-keeping best practices and review the business’s records to ensure they are complete and accurate.

C. Staying Compliant with Tax Laws

Staying compliant with tax laws is essential for implementing a business tax plan. This includes understanding and complying with the tax laws that apply to the business, filing required tax returns, and making timely tax payments. A CPA can assist in staying compliant by providing guidance on tax laws and regulations, preparing and filing tax returns, and advising on any necessary compliance measures. By staying compliant with tax laws, a business can avoid costly fines or penalties and can focus on implementing its tax plan to achieve its financial goals.

Implementing a tax plan is an ongoing process and by regularly communicating with a CPA, keeping accurate records and staying compliant with tax laws, business can make sure that the plan is working effectively and make adjustments as needed.

V. Reviewing and Revising the Tax Plan

A. Monitoring Progress Towards Goals

After implementing a business tax plan, it is important to regularly monitor progress towards the established goals. This includes tracking the business’s financial performance and comparing it to the objectives set out in the tax plan. By monitoring progress, a business can identify any areas where the plan is not working as expected, and make adjustments as needed. A CPA can assist in this process by reviewing financial statements, providing guidance on performance metrics, and helping the business track its progress towards its goals.

B. Making Adjustments as Needed

As a business’s financial situation changes, it may be necessary to make adjustments to the tax plan. This can include revising financial goals, adjusting tax-saving strategies, or making changes to the plan’s implementation. A CPA can assist in this process by providing guidance on potential adjustments, recommending changes, and implementing new strategies. By making timely adjustments, a business can ensure that its tax plan remains effective and aligned with its goals.

C. Staying Current with Tax Laws and Regulations

The tax laws and regulations are subject to change, so it is important for a business to stay current with the most recent developments. This includes monitoring for changes in tax laws and regulations, which could have an impact on the business’s tax plan. A CPA can assist in this process by providing updates on new tax laws and regulations, and advising the business on how to stay compliant. By staying current with tax laws and regulations, a business can ensure that its tax plan remains effective and compliant, and take advantage of new opportunities as they arise.

Regularly reviewing and revising the tax plan allows business to adjust and optimize the plan to ensure it is meeting the business’s goals and objectives and stays compliant with current laws and regulations. A CPA can play a crucial role in this process by providing guidance and support in every step of the way.

VI. Conclusion

A. Summary of Key Points

Creating a business tax plan is a vital step in achieving financial success and staying compliant with tax laws. It involves understanding the business’s financials, identifying potential deductions and credits, evaluating tax liability, setting financial goals, planning for tax payments, and implementing tax-saving strategies. Regular review and revisions are necessary to ensure the plan remains effective and aligned with the business’s goals. A certified public accountant (CPA) can provide expert guidance and support throughout the process.

B. Importance of Regular Review and Revisions

Regular review and revisions are essential for ensuring that a business tax plan remains effective over time. As the business’s financial situation changes, the tax plan may need to be adjusted to reflect new circumstances. Staying current with tax laws and regulations is also important to ensure that the plan remains compliant. By conducting regular reviews and revisions, a business can ensure that its tax plan remains aligned with its goals and that it is taking full advantage of all tax-saving opportunities.

C. Next Steps for Implementing a Successful Business Tax Plan with the Help of a CPA

To implement a successful business tax plan with the help of a CPA, the first step is to schedule a consultation with a reputable and experienced CPA firm. Don’t let taxes hold your business back. Contact Peak Reliance CPA today at +1 (718) 218-5558 or via email at [email protected] to schedule a consultation and start developing a comprehensive business tax plan tailored to your unique needs and goals. During the consultation, the CPA will review your business’s financials, identify potential deductions and credits, and evaluate your tax liability. Based on this information, the CPA will work with you to set financial goals, plan for tax payments, and implement tax-saving strategies. Ongoing communication and regular reviews will help to ensure the continued success of the tax plan.

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5 Ways an Accountant Can Help Your Small Business

5 Ways an Accountant Can Help Your Small Business

5 Ways an Accountant Can Help Your Small Business

November 17, 2022

5 Ways an Accountant Can Help Your Small Business

peakreliance

Accounting, Bookkeeping, CPA

Having your own business is a great way to follow your passions and see a return on all that work you put in. But when it comes to numbers, many small business owners feel like they’re stuck in second gear.A certified public accountant (CPA) can help you get back on track with all things accounting related. An accountant can assist with financial reporting, tax preparation, and audit services. They aren’t just useful for big businesses. Small businesses also stand to benefit from hiring an accountant. Here are six ways an accountant can help your small business grow and thrive.

  1. Stay on top of your financial responsibilities.

    Accountants are highly trained professionals who can help you stay on top of your financial reporting and payment obligations. Whether it’s sales tax, payroll taxes, or filing your quarterly financial reports, your accountant can assist with all of these. Every state has its own set of rules for businesses to follow, and even a simple oversight could lead to fines and penalties. Having someone on your team to help keep you current and compliant can save you a big headache in the long run.

  2. Help you understand your company’s financial position.

    An accountant can help you understand your company’s financial position. This includes everything from your current assets and liabilities to your ongoing cash flow. The better you understand your current financial position, the better you can plan for the future. Hiring an accountant can help you identify the best path forward. From cash flow forecasts to long-term debt obligations, your accountant can help you understand all aspects of your financial position. This can also help you see where you may need to make some changes to improve your financial standing.

  3. Help you spot red flags in your company’s financial reporting.

    As you work with your accountant to create your financial statements, you can work together to identify any potential red flags in your financial reporting. This can include missing information or errors in your company’s financial reports. This can help you spot issues early and correct them before they turn into major problems. A quick audit of your financial reports from your accountant can help you catch issues before they cause major problems for your business.

  4. Assist with tax planning and preparation.

    Your accountant can also assist you with tax planning and preparation. This includes assisting you with choosing the best accounting method for your company and identifying any write-offs that you qualify for. But it also includes helping you plan for taxes in the future. Your accountant can help you forecast your company’s taxes and identify tax savings and breaks that you qualify for. Tax planning is a year-round process that can help you reduce your tax liabilities and improve your cash flow.

  5. Provide auditing services to make sure everything is in order.

    Depending on your company’s size and needs, your accountant may also be able to provide auditing services. An audit is a thorough review of your company’s financial statements to make sure everything is in order. This can include a review of your bookkeeping records, financial statements, and financial controls. An audit can help you identify issues early and correct them before they become major problems. This can also help you correct issues that were not caught during your financial reporting process. An audit may be required for certain government contracts, industry types, or for your company’s growth. Your accountant can help you determine if you need an audit and can assist with the process.

While it may not seem like an accountant can do much for a small business, the reality is that these professionals can actually help you save money and prevent problems from arising in the first place. If you’re not sure if hiring an accountant is right for you, ask yourself these questions first. Do you feel like you’re always behind on your financial obligations? Do you have no idea how to forecast your company’s financial position? If you answered yes to either of these questions, then it might be time to hire an accountant.

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Estimated Tax in California in 2022 – How to Prepare for Tax Season

Estimated Tax in California in 2022 - How to Prepare for Tax Season

Estimated Tax in California in 2022 – How to Prepare for Tax Season

November 16, 2022

Estimated Tax in California in 2022 - How to Prepare for Tax Season

peakreliance

Accounting, Bookkeeping, CPA

When’s the Tax season? How much tax do I owe? What should I do to save money? All of these questions will be answered by those who sweat cash during Tax season, April 15-22. Many people panic when they see the date “Tax Season” comes out of the year. They think they’re going to struggle making their payments or get into big debt. But nothing could be further from truth! Tax season is when businesses and individuals alike start paying attention to their tax returns and understanding how much they owe. The amount owed will vary from person to person based on what kind of return and tax calculations were performed, but in all cases it will be something to focus on during this time.

What is Tax Season? 

During tax season, members of the public, businesses, and organizations file their own tax returns. The income they earn, as well as the amounts they pay, are reported to the Internal Revenue Service. The IRS then issues a tax return report card to each taxpayer to help them understand where they stand with their tax obligations. 

Why is Tax Season a Good Time to Start Planning? 

Because tax season is typically the most time- consuming part of the year for taxpayers, it’s a great time to plan ahead and take steps toward saving money. While Planning is not required, it’s a good idea to have some kind of strategy in place. If you’re filing a tax return for the first time, it can be helpful to have an expert prepare your tax return for you. The person who prepares your tax return is known as an “ Auditor-in-Chief ”. An Auditor-in-Chief is an accountant, an attorney, an economist, a IRS special agent, and an accountant-supervisioning surgeon. The Auditor-in-Chief works for and is paid by the organization that hired the Auditor-in-Chief to prepare the organization’s tax return. If you hire an Auditor-in-Chief, they will prepare your tax return for a fee. The Auditor-in-Chief will also audit your return, meaning they’ll go over your returns and make sure you’re compliant with the law. Without an Auditor-in-Chief, you’re on your own when it comes to auditing your own tax return. 

The Fresh Start Provision 

One of the most important things you can do is request a “ Fresh Start ” with the IRS. The Fresh Start Provision allows you to start the process of getting your tax return Prepared for Filing. The Fresh Start Provision only applies if you’ve been audited by the IRS and want to start the process of resolving the issues with your tax return. If you want to start the Fresh Start process, the first step is to write a letter to the IRS explaining why you want a Fresh Start. You can find more information on the Fresh Start Provision in IRS Publication 519. 

How to Prepare for Tax Season 

Now that we’ve gone over what to expect during tax season, it’s time to get down to the nitty-gritty. The first and most important thing you can do is prepare yourself mentally. Remember, you’re not alone! There are millions of people who file tax returns and many of them have gone through this process before. Make sure you have the facts straight and know where you are legally as a taxpayer. It’s also a good idea to get a tax return preparer on retainer who can help you through the process and beyond. 

Bottom Line 

The best way to prepare for tax season is to make sure you know what your taxes are, where you’re legally required to pay them, and how much you’re obligated to pay. Once you know your answers to those questions, the rest will come easier. The information in this article is accurate and up-to-date as of the date of publication. The information is not intended as legal or tax advice. If you have specific questions about your situation, you should consult an accountant or tax lawyer. The information in this article is current as of the date of publication. The materials are not intended as tax advice or as a specific strategy to prepare for any given situation. The information is only meant as a guide. If you are interested in starting your own tax return, we recommend that you contact a tax attorney or your local IRS office for more information. The IRS does not accept unsolicited tax returns.  

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california, Estimated tax, Tax Season

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All About IRS: Tax Filing and Audit

All About IRS and Filing Taxes

All About IRS: Tax Filing and Audit

November 15, 2022

All About IRS and Filing Taxes

peakreliance

Accounting, Bookkeeping, CPA

What is IRS?

The Internal Revenue Service also famously known as the IRS is a bureau of the US Department of Treasury. The IRS is responsible for collecting tax revenue and assessing finances for companies operating in the US.

The IRS has gone through several reorganization and modernization changes, over the years since it’s foundation back in 1862, during this time it was renamed and experienced a change in authority by being placed under the Department of Treasury, USA.

IRS is very clear in its mission. The bureau’s work is to “Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”

What does IRS do?

IRS aims to carry out the tax laws in the US. It evaluates and collects taxes, assists taxpayers understand and meet their tax responsibilities and helps implements tax law to ensure everyone pays what they rightfully owe the state.

The IRS executes three main functions:

  1. Administer tax laws
  2. Process tax returns and collect revenue
  3. Taxpayer service
  4. Tax law enforcement

Collecting taxes

One of the most significant responsibilities of the IRS is to assess and collect taxes on behalf of the government. The sum consists of income taxes, employment taxes, business income taxes, excise taxes and estate and gift taxes etc.

Along with the timely collection of taxes, they are also in authority for issuing tax refunds, which an individual or business can collect as a result of the overpayment of the due tax amount.

Providing services to taxpayers

Another central responsibility of the IRS is providing services to taxpayers in the form of guidance and help regarding tax laws and legal matters. These services can be availed through the IRS website, its telephone helplines, IRS Taxpayer Assistance Centers and volunteer tax assistance.

Enforcing tax laws

A final responsibility of the IRS is the implementation of tax laws. The IRS identifies and pursues those who have underpaid/not paid their taxes, whether as a result of a calculation error or deliberate criminal activity. These examinations typically take the form of either correspondence or field examinations. They carry out criminal investigations and supervise tax-exempt organizations and qualified retirement plans. It is the responsibility and accountability of the IRS to ensure all companies and individuals pay their fair share on time and accurately.

The IRS and Audit

As part of its tax law implementation mission, the IRS audits a hand-picked portion of income tax returns each year. In the fiscal year 2020, the agency audited 509,917 tax returns.

The reasons for an IRS audit vary according to some factors which may also increase the chances of examination for some companies. The chief amongst these is higher income levels. Other factors that may prove to be red flags for an audit include; not declaring the right and accurate amount of income, claiming a higher-than-normal number of business-related deductions, making excessively hefty charitable donations compared to income, and claiming rental real estate losses. However, no single factor determines who does or does not face an IRS audit each year.

The IRS and Taxes

Companies can pay their due taxes to the IRS through the following ways:

  1. An electronic funds transfer from your bank account
  2. A debit/credit card
  3. A same-day bank wire or
  4. An electronic funds withdrawal at the time of e-filing your return.

There are other payment options available as well for businesses and individuals who cannot mare electronic payments. They can pay through:

  1. A personal check
  2. A cashier’s check, or
  3. A money order in the name of the US Treasury.

 However, they need to be sure that it contains the following information:

  • Company’s name and address
  • Phone number
  • Social Security number (where applicable)
  • Employer identification number (where applicable)
  • Tax year
  • Related tax form or notice number

Businesses can even pay in cash if they wish however, with each payment method all terms and conditions must be followed to avoid any future problems or delays as this is a sensitive legal matter.

Out of all of these options, the best and most efficient, quick and safe way is to use on of the electronic payment methods to clear the payment.

Do we really need IRS?

IRS claims to be one of the worlds most efficient tax administrators. The taxes that they collect are used to fund public utilities like national defense, aid for veterans, Social Security, medical care services, foreign affairs, community development and other services that the government provides.

IRS performs an important function for the US government, keeping all organizations, companies and business individuals in line with the tax laws. The bureau collects the necessary funds that the state needs to provide public services to its inhabitants and makes the functions of the entire federal government possible.

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Accounting, Audit, Bookkeeper, Bookkeping, cpa, IRS, Online CPA, Tax Deductions, Tax filing, Taxes

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What’s the Penalty for Not Filing Taxes

What's the Penalty for Not Filing Taxes

What’s the Penalty for Not Filing Taxes

November 14, 2022

What's the Penalty for Not Filing Taxes

peakreliance

Accounting, Bookkeeping, CPA

Most, if not all, taxpayers don’t intentionally file their taxes late. There are many good reasons why companies often fail to file their taxes on time however, it’s important to file tax return as soon as possible, even if a company can’t pay them yet.

Penalties for not filing taxes by IRS

There are two parts to filing taxes:

  1. The actual tax returns
  2. The payment of the taxes owed

If these are not done by the IRS’s deadlines, there are two penalties that will be charged.

  1. Failure to file taxes

In case of failure to file your tax return with the IRS by the deadline, IRS will charge 5% of the unpaid taxes every month until the income tax return has submitted. The maximum penalty will not surpass 25% of the unpaid taxes.

In case the tax return hasn’t been filed within sixty days of the deadline, the lowest penalty for failure to file is $210. If the amount of owed taxes is less than that amount, the penalty is 100% of the total tax bill.

2. Failure to pay taxes

If federal tax return paperwork is filed but tax bill hasn’t been paid on time, the IRS will charge a penalty of 0.5% of the unpaid taxes every month.

In case where you fail to file your tax return along with not having paid any taxes due by the deadline, the penalty charged per month for both is 5%. In all cases, penalties will be stopped at 25% of the year’s tax bill.

Failure to file and pay your company’s taxes is considered a federal crime. The IRS has an established administrative penalty schedule in place for delayed filing, but the longer you wait to file, the bigger the risk of potential civil or criminal penalties.

What happens if you don’t file taxes at all?

The IRS will alert you about this failure in increasingly direct ways.

1. You’ll get reminder letters.

2. You’ll start acquiring penalties.

3. Your assets may be levied.

4. The IRS will file for you.

5. There might be legal consequences.

What to do?

If deadline is over, the IRS may file a “substitute return” for you. However, as it is very well understood, the IRS will not be looking to save you any money and a substitute return will not contain any of the standard deductions your accountant would naturally include in your tax return. Working example, a substitute return only permits one exclusion: single or married filing taxes separate, so you will end up with higher tax liability than if you would have just filed.

The bottom line is, there are several reasons to file your tax return even if you cannot pay, including:

  • Avoiding or reducing the “failure-to-file” penalty
  • Avoiding a substitute return being filed by the IRS, and availing your adjustments, deductions and exemptions.
  • Starting the act of limitations for a possible audit of your return.
  • Starting the act of limitations for collection of the tax, interest, and penalties on your return.

Whenever IRS finds out that you owe them money, they will send you a bill called a “Notice of Tax Due” and “Demand for Payment”. This document lists the taxes you owe, along with interest and penalties. Because interest and penalties continue to accumulate, you should pay as soon as possible.

Payment Options and Exemptions

It’s smart to always pay as much as one can, to decrease the amount of interest and penalties. Once the payment is made you can write or visit the nearest IRS office and inform them about your situation. Companies can pay their due taxes to the IRS through the following ways:

  1. An electronic funds transfer from your bank account
  2. A debit/credit card
  3. A same-day bank wire or
  4. An electronic funds withdrawal at the time of e-filing your return.

Based on your situation, the IRS may offer one of the following resolutions to paying your bill:

  1. Installment Option

IRS may agree that you make monthly payments under an installment agreement. This lets your full payment to be compensated in smaller, more manageable chunks.

  1. Temporary Delay

The IRS may give you the option of temporarily delaying the collection of your bill. The condition is if they determine you really cannot pay any of your tax debt because of a logical. The IRS will however be on their toes and continue to evaluate your ability to. They may also file a “Notice of Federal Tax Lien” to protect the government’s interest in your assets.

  1. Offer in Compromise

The IRS has the option to settle your unpaid tax accounts for less than the full amount of the due amount if you qualify for an “Offer in Compromise”. This applies to all taxes, interest and penalties. An Offer in Compromise is the last option and is only considered after all other payment alternatives have been checked.

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How to Hire an Appropriate CPA for Your Business

How to Hire an Appropriate CPA for Your Business

How to Hire an Appropriate CPA for Your Business

November 11, 2022

How to Hire an Appropriate CPA for Your Business

peakreliance

Accounting, Bookkeeping, CPA

What does a CPA do?

Usually, when a business is just starting out, the financial tasks fall squarely on the owner’s shoulders. As tempting as it can be to maintain that arrangement once the money starts to flow, not only to avoid paying someone else to do it but also to avoid allowing someone else to have access to the information, it can become a tiring and mundane task in the long run.   

Hiring an accountant at the right time through the journey to establishing a successful business is an integral step towards victory. It is a great idea to hire an online CPA when it comes to this. A CPA is a tax expert with a sound knowledge of tax laws and legal processes. CPAs can take a good legal care of your business’s taxes, answer important financial questions and potentially save your business a lot of money. They, unlike general accountants have passed the challenging Uniform CPA Exam that tests their understanding of tax laws and standard accounting trials. Through this exam they attain a state license. 

 The kind of exposure and skill that a CPA has can improve your overall tax representation.  

Some of the tasks that they can help you with include: 

  • Addressing legal requirements: tax return filing, compliance documents, audits.
  • Preparing yearly financial statements, statements of accounts, and reports.
  • Presenting a breakdown of company’s financial conditions.
  • Evaluating financial decisions about the company progress.

CPAs are equipped with hands on skills to help small businesses and start-ups with a lot of technical financial matters. 

Is your business ready to hire a CPA?

Every owner of a small business should consider hiring a professional accountant before the need even arises. Accounting services are extremely vital for the health of your business, so as soon as you start to feel overwhelmed by managing your finances, that is the best time to hire an accountant or a CPA. However, taking other factors into consideration, hiring one at the wrong time can slow down your processes as well. 

Here are a few appropriate instances to hire a CPA: 

  1. At the beginning of the fiscal year to ensure you start right. 
  2. At the end of a month and going into newly reconciled accounts to maintain a fresh set of financial statements and records. 
  3. When it’s time to file your taxes. 
  4. When you as the owner feel overwhelmed by bookkeeping and financial record maintaining and other areas that need your dedicated time and focus are being over looked. 

Hiring a CPA can help you keep your business agile regardless of the economic or societal changes that may occur around you. 

Tips for finding an appropriate CPA:

1. Do background research by looking for referrals and reviews

It’s a good idea to start by asking around for recommendations from other experienced people and companies in your area who have a CPA onboard. This is a chance to use your connections. Ideally, you should be able to find a valuable referral for a new CPA through your bank, realtor, or employees. 

In case your local referrals aren’t working, you can search online for accountants in your area and use online reviews about their services to help you make a decision. Forums and other online platforms like Yelp, LinkedIn, or Facebook groups can be helpful resources. Making sure you find a skillful and dignified CPA is an integral part of the process because of the responsibilities that they will be looking after for you and your company. 

2. Evaluate your needs and their quality service

CPAs specialize in many different services. Some choose being a tax preparer for numerous companies, while others would rather assist a handful of small business owners steer financial decisions year-round. Some offer bookkeeping services and will prepare the company’s tax returns, and others will prefer intricate compliance cases. 

As part of your preliminary consultation with an accountant, inquire about the services they provide to their clients. Also, discuss how they tend to work with their clients and how much experience they have in your industry.  

It is important to be clear about the kind of services you need to avail from a CPA before you bring them on board. 

3. Examine their qualifications

CPAs specialize in many different services. Some choose being a tax preparer for numerous companies, while others would rather assist a handful of small business owners steer financial decisions year-round. Some offer bookkeeping services and will prepare the company’s tax returns, and others will prefer intricate compliance cases. 

As part of your preliminary consultation with an accountant, inquire about the services they provide to their clients. Also, discuss how they tend to work with their clients and how much experience they have in your industry.  

It is important to be clear about the kind of services you need to avail from a CPA before you bring them on board. 

4. Meet with prospective accountants

Once your background checks are complete, you need to set up meetings and have a more meaningful conversation with each of your shortlisted accountants. You can consider focusing on the following things when interviewing them: 

  • Questions about licenses, certification, relevant qualifications or professional organizations.  
  • Their experience working in your industry.  
  • Their rates for several services like tax preparation fees.  
  • Do they use outsourcing and if yes then for which services?  
  • The kind of accounting software they use.  
  • Their E-file policies for tax return.  
  • Their communication policies (Email, phone etc.)  
5. Determine your level of comfort

The right choice for an accountant will be a professional whose financial and legal advice will direct you through long-term decisions for your business. Their advice will be your direction every year through legal statutes at tax time. 

A talented accountant will not only formulate your tax documents but will also sign them with their credentials. They will represent you if any tax questions or issues arise throughout their tenure. You, as a business owner, want to be confident in your decision with giving access to information this sensitive and essential to an outsider. 

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Internal Bookkeeping vs Hiring a CPA

Internal Bookkeeping vs Hiring a CPA

Internal Bookkeeping vs Hiring a CPA

November 8, 2022

Internal Bookkeeping vs Hiring a CPA

peakreliance

Accounting, Bookkeeping, CPA

Small business and start-up owners are always under a constant financial pressure as their business is in the growth phase and hence, seeking third party support for financial matter, tax filing, legal matters, business advise and managing accounts can be an ideal choice for them in numerous ways. It is not unusual in today’s changing world that business owners till the very last extent try to manage their finances themselves, but when businesses grow so do their financial operations. Sooner or later all founders are faced with this decision to hire an internal accountant or an accountant online, preferably a Certified Public Accountant (CPA). Both types of services have similar basic responsibilities including but not limited to:  

However, there are many ways in which internal bookkeeping and a CPA online are different and better than each other in their own ways. Ultimately, it is the job of the business owner, in choosing the best possible service, to take the right decision for their firm. 

Benefits of Bookkeepers

For many start-ups, a part-time bookkeeper may be a primary hire. Book keepers can take care of tasks such as maintaining general ledgers, completing financial reports, handling payrolls, and processing invoices.  

Business owners may constantly need to be in communication with their bookkeepers and have monthly meetings to ensure all financial matters have been dealt with properly. A regular and effective communication will very likely ensure good growth volumes, achieving sales and other company goals and more, as bookkeepers can inform you about the accurate growth status of your company. 

Here are some general tasks that a bookkeeper is capable of performing: 

  • Maintaining financial records such as ledgers, invoices, payment slips, tax documents. 
  • Keeping the financial numbers up to date  
  • Keeping all company accounts up to date 
  • Preparing the monthly and yearly financial report 
  • Preparing the regular financial status report of the company 
  • Manage payroll 

Benefits of CPAs

As much of a self-explanatory the term itself is, an online CPA or accountant is one providing accounting and bookkeeping services virtually. An online accountant will combine the best of the traditional accounting practices with effective cloud-based accounting software to manage the accounts and finances of your business. Some things that a CPA can bring to the table are as follows: 

  • Addressing legal requirements and communications: legal/compliance documents, annual audits. 
  • Preparing annual financial statements, statements of accounts, and other financial reports. 
  • Breakdown and analysis of company financial conditions. 
  • Evaluating financial decisions concerning company progress. 
  • Handling more complex tax matters like filing tax returns. 

Hiring a CPA is a great idea because as a business owner you can make sure that all information is being tracked appropriately. Additionally, they can also help you prepare your tax returns and conduct an annual analysis of your business.  

While making a decision about growing and scaling your business, a CPA can help you dive deep into the complexity of numbers to understand your existing opportunities and risks and help you make spot on financial decisions. They may also have recommendations that can help you function more efficiently as a business. 

CPAs are tax experts. They are well equipped with the necessary skill set to predict the right time to make a financial change or to alter the course of the finances. Having an online CPA enables businesses to have a go-to person for all related issues. For instance, if you decide to make a big change such as, moving, merging, business purchases, or closure, a CPA can help you a great deal in minimizing your costs, keeping you on track with your financial goals and targets while simultaneously analyzing all financial records. CPAs can at any point in time estimate and inform you about the fair market value of your business, meaning they can save you a lot of valuable time and effort. 

Making the Perfect Choice for Your Business

A bookkeeper has the basic skill set to help out with traditional accounting needs however, when it comes to more complicated and demanding accounting needs, a CPA is a good and smart choice for all start-ups. This is because of the plethora of additional services and helpful insight they bring to the table other than providing basic accountant services. 

Regardless of the size or complexity of a company, accounting is a core part of your business strategy, not an afterthought. It can be a great idea to start small and later get your books in order. As your business grows, you must be diligent enough to figure out how to make the right additions to your accounting staff, both internally and externally, so that you have the right information to progress, at the right time.  

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Accounting, Bookkeeper, Bookkeping, cpa, Online CPA

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CPA vs Tax Preparer  

CPA vs Tax Preparer

CPA vs Tax Preparer  

November 7, 2022

CPA vs Tax Preparer

peakreliance

Accounting, CPA

When you’re filing your taxes at the end of a fiscal year, as a small business you have a few options to help you get through this complex process error-free.  

Option 1, you can file your taxes yourself. 

This may definitely be a sensible option for a start-up in its early days, with extremely simple tax return. It can save you the cost of hiring a professional accountant to file the return for you.  

If your start-up is past the simplicity phase then you may want to consider working with an actual professional. This is option 2.  

There are normally two types of professional accountants to pick from for your tax preparation needs:  

  1. A certified public accountant (CPA)
  2. A non-CPA tax preparer 

Let’s discuss a few key differences between these types of professionals:

Knowledge and Experience

The majority of the non-CPA tax preparers are not required to have any significant background in accounting. They are only required have to do some studying and pass the IRS’s competency exam in order to be eligible to charge a fee for tax preparation services. 

Much of the competency exam is based mostly on rote memorization and doesn’t truthfully test critical thinking skills. Additionally, tax laws and dealing with legal situations is not covered by this exam. 

On the other hand, CPAs have a much more extensive knowledge background and experience in traditional accounting and latest accounting systems. CPAs have a more rigorous and well-established qualifications benchmark which requires them to have at least a Master’s degree in accounting. They then need to pass a series of challenging exams, each of which tests a different area of accounting. 

A CPA who focuses on tax accounting, is highly likely going to have a much more in-depth knowledge of the tax laws, and is better equipped to lever any unusual tax situations that your company may have. 

Stability and Consistency

CPAs work continuously, and so can provide constant accounting services to their clients. When it comes to handling your financial matters, this can offer stability and peace of mind to you as an owner. This continuity enables the accountant to become acquainted with your finances, business situation, and any other matters that may impact your finances and your tax return. 

Most tax preparers, however, work for a grander tax preparation company and are only working seasonally. Hence it is quite unlikely that you will ever work with the same tax preparer twice, even if you go into the same office every year.  

Ongoing Assistance in Financial Matters

As mentioned, CPAs are made to study deeper and are tested on far more than just taxes. They acquire knowledge and experience of numerous areas of accounting, including business audits, budgeting, forecasting, variance analysis etc. Many business owners want to take advantage from the fact that CPAs are capable of helping them with a wide range of financial matter, and so they need more than just tax preparation and accounting services.  

Because they’re managing more than just one aspect of your finances, they will by all means have a better understanding of the company’s financial standing. This can help you get the best outcome on your return. 

Contrary to that, non-CPA tax preparers only focus on taxes, they cannot provide constant services in other accounting areas.   

Audit Representation

Here is another important comparison between CPAs and general tax preparers. Most tax preparers cannot and will not offer you representation if you’re audited. 

CPAs, as compared to them, have been legally authorized to represent their clients during a legal audit.  

Thus, CPAs can bring you a lot of peace of mind as a business owner who is stuck in such a stressful time. An audit can turn out to be less of a hassle and significantly easier, less stressful, and more manageable when you have legal representation from a person who understands the law and all financial legalities. 

Why You Should Use a CPA

Choosing which type of professional for preparing your return is a tricky decision. Most individuals however, are better aided by a CPA. With their greater knowledge and experience in tax accounting and a more diverse set of skills, their ability to assist you with a huge range of financial matters remains unshaken. 

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Accounting, cpa, Online CPA, tax, tax Preparer

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4 Reasons to Incorporate Your New Business as Early as Possible

Incorporating Early for New Business
Why should you incorporate your business as early as possible

4 Reasons to Incorporate Your New Business as Early as Possible

November 6, 2022

Incorporating Early for New Business

peakreliance

Accounting, CPA, Taxes

Entrepreneurs and small business owners often get caught up in making sure their start-up thrives and get engrossed in planning spot-on strategies to innovate and develop their business idea. Often, the notion of securing the idea and legally owning it gets ignored. 

Incorporating your start-up early is a very beneficial step that should be kept under consideration from the very beginning. In layman words, incorporating a new business means taking the legal ownership and turning the business into a formal company recognized by the related state of incorporation. In technical terms, it is turning your sole proprietorship or general partnership into legally and formally recognized corporation.  

Incorporating your business is simple contrary to popular belief and is not nearly as complex as it may appear to be. While people have these misconceptions that this step should be taken once the business has matured enough or is generating a specific amount of money, there are many reasons why incorporating your business can come in handy and here’s how. 

1. It will help avoid disputes among founders

Running a start-up may seem easy from afar but investing 60 hours a week into a business which doesn’t guarantee immediate rewards can be both tiring and frustrating. A considerable amount of business owners doesn’t even earn a salary while putting in tireless efforts.   

Many times, this may leave owners and founders exhausted and disappointed — possibly with each other as well. Keeping this under consideration, it’s best to create an equity split as early as possible. This will help prevent clashes among all founding parties as co-founder equity negotiations will work better. 

Incorporating early will make possession shares concrete so in case one co-founder decides to leave or sell their shares, incorporated businesses can handle that in an organized manner and with resilience, that would not affect the other parties which can prove an advantage if one co-founder wishes to sell their share within the first year or two.  

2. Provides protection against personal liability

Since an incorporated business is known as a legal entity, and its proprietors are protected from all personal liabilities for corporate debts that the business may ensue. 

So, in case your startup is sued and obliged to make a payment, your personal assets will generally remain secure. Even in worst cases like bankruptcy, the corporation will be held accountable not the founders. 

Incorporating your start-up as soon as possible can relieve you of some of the emotional strains and anxieties that founders may experience. 

3. It will help attract more investors and bank support

With a corporation, it’s generally easier to raise additional capital or secure a loan because of the sense of legitimacy it brings to the business. When you incorporate your start-up, it makes you eligible for opening up a bank account and you can start building a line of credit, which, for a small business owner, is a requirement. 

Any startup without a formal business entity defined is viewed as a mere hobby, and seldom interests investors or potential partners. Also, with changing trends and rapid advancements these days, you need to be ready to move quickly from an idea/hobby to a business. Successful startups are all about being equipped to move to accomplishment before the market and it’s need changes or new competitors appear. 

4. Tax benefits

Another noteworthy benefit of incorporating your business, and one of the most crucial to leverage, are the numerous tax deductions that are accessible to corporations only. When a start-up goes from being a sole proprietor or a general partnership to a corporate business structure such as an LLC, there are plentiful deductions at your disposal that were not available to individuals. Specifically, you may see tax benefits such as: 

  • The capacity to spread out your loss over a longer period of time  
  • The opportunity to deduct start-up and operational expenses  
  • The right to deduct employee benefits like pf and health insurance  

The local and state taxing authorities can offer multiple incentives to you more readily and more often if you are a corporation. Keep in mind, however, that tax laws are complex as they always have been and it’s a great idea to consult a certified accountant or CPA before claiming any deductions from the state. 

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Accounting, cpa, Incorporating a business, Online CPA, pros and cons of incorporation, tax

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What Are the Pros and Cons of Incorporating Your Business? 

What are the pros and cons of incorporating your business

What Are the Pros and Cons of Incorporating Your Business? 

November 5, 2022

What are the pros and cons of incorporating your business

peakreliance

Accounting, CPA, Taxes

Incorporating a business at some point is integral for its further growth and as the founders, business owners are often skeptical about the whole idea of turning their start-up into a corporation.  

In this blog we are aiming to help you make an informed decisions about incorporating your business by helping you figure out if it’s the right time to do so or not. But first, let’s elaborate a bit more on what it means to ‘incorporate a business’.  

Incorporating means to take the legal ownership and turning the business into a formal company recognized by the related state of incorporation. In technical terms, it is turning your sole proprietorship or general partnership into legally and formally recognized corporation.  

A corporation is an entity in itself and separate from its owners thus having its own assets and liabilities separate from the founders. There are many pros and cons when taking this decision but what you need to consider is that if the move is right for you and your business. 

 

Pros of Incorporation

  1. Independent legal entity 

    Perhaps one of the biggest benefits to becoming an incorporated company is its legal separation from its founders. As long as the business is not a corporation, the business and the owner is the same legal entity, so if anything goes wrong or if the business owes money, the owners will be personally liable for it. With a corporation, the risk stays with the company as an independent entity, and to the maximum extent, the directors aren’t liable. 

    The best example of this is, if a customer or client took the business to court, with a sole proprietorship, it would be the owners’ responsibility, whereas with a limited company it would be the company itself.  

  2. Tax 

    Tax rules are applied differently on start-ups and sole traders and on corporations. For a running sole trader business where the generated income is beginning to reach new highs, your accountant may suggest you to become a registered company to take advantage of your personal tax savings from the existing tax laws for corporations. While as a sole trader your profits are seen as your total income and you are taxed on it’s basis, a limited company is completely independent and the director is taxed as an employee eliminating all miscellaneous liabilities. 

  3. Raising Capital through Shares 

    A corporation has the advantage of selling its shares. If you’re looking to expand or branch out into a new area, or new to raise additional capital, you can sell the company’s shares to friends, family or other interested investors to help your business raise money. 

  4. Reliability 

    A start-up can be set up in no time at all, and there is no solid proof that they are even a legitimate or long-lasting business. Of course, this doesn’t mean that start-ups or sole traders do not qualify as businesses but when comparing a corporation with a business that has yet to be incorporated, the difference will definitely remain. The credibility of a state recognized business will always be more than the one not on this position. On that basis, some people and clients place more trust in limited companies. So incorporating your business will increase its standing and ultimately will ensure profitability in the future by eliminating doubts about the trustworthiness.  

 

Cons of Incorporation

  1. Additional complicated paperwork

    Incorporating your business can be both a time-consuming and a complex process due to all of the technical and elaborated paperwork involved. To maintain a corporation, you need to keep detailed records of your articles of incorporation and bylaws, including information about all meetings held as well as a register of directors, employees, and shareholders. 

    In addition to tracking meetings and other activities, it is essential to keep organized records of transactions. You need up-to-date records of each and every financial transaction so the corporation can file income tax returns correctly. 

    Since, each state also has its own guidelines on recordkeeping requirements for incorporated businesses, you must also adhere to the rules put forward by your state.  

    Hiring an accountant or a CPA can help you a great deal in this case. 

  2. Cost of the process

    One shortcoming of incorporating a business are the expenses that come with it. Because a corporation has a more complex structure than other forms of businesses, they generally tend to be more expensive to set up. 

    In order to form a corporation, you have to pay certain fees and after you establish your corporation these fees continue. They are ongoing and can be costly for small businesses who aren’t generating enough income. For instance, some states impose long term fees on corporations. Here are some other fees that you may have to pay: 

    • Set-up cost 
    • Legal fees 
    • Accountant fees 
    • State fees

     

  3. Double taxation 

    Another drawback of incorporating your business is double taxation. Double taxation is when a corporation has to pay the same amount of income tax twice on the same income. For a corporation, this means being taxed on both personal and business levels. 

    Corporations always pay taxes on their annual/yearly earnings. When a corporation pays dividends to its shareholders, the dividends have tax liabilities as well. Shareholders who receive these dividends must pay taxes on them too. 

    Business structures other than a legal company can dodge double taxation with pass-through taxation. Pass-through taxation refers to when taxes pass through the business and onto the owners or individuals simultaneously. 

    If you want to sidestep double taxation altogether, you may want to establish an S corporation or consider all possible outcomes and be prepared of all before incorporating your business. 

     

 

 

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Accounting, cpa, Incorporating a business, Online CPA, pros and cons of incorporation, tax

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