No business eagerly awaits the opportunity to pay more in taxes and have less to invest back into the business or take as profit. In fact, every business would like to pay as little as possible, within the confines of the law. The business tax landscape is a minefield – complicated, fluid from year to year, and sometimes subject to interpretation. It would not be possible for businesses to minimize their tax burden without the help of CPAs.
CPAs – certified public accountants – are ordinary accountants on steroids. Not literally, of course, but in order to earn CPA status, they must fulfill added training requirements and pass a rigorous exam to demonstrate their expertise in financial reporting, auditing, taxation and business consulting. The CPA designation allows them to perform specialized financial tasks and represent clients before government agencies, like the IRS.
How Does a CPA Lower My Taxes?
Because CPAs are experts in taxation who keep abreast of changes in tax law, they can identify tax deductions and credits for which you may qualify but were not aware of. These include:
- home office expenses
- business travel and use of vehicle
- charitable contributions
- professional development and training
- employee wages and benefits
- insurance premiums
- equipment, supplies and property
- green energy investments
- research and development costs
- energy efficiency improvements
- property cost reclassification
- and much more.
Some of these deductions and credits require significant documentation that need to be collected and tracked all year, not just at tax time. CPAs advise their clients in advance of the costs and benefits of identifying and documenting these activities and expenses in order to qualify.
Case Study: How a CPA Can Help Maximize a Deduction
Many businesses that would qualify for the R&D Tax Credit fail to apply because of misconceptions about the credit. They are missing out on significant tax savings every year.
In fact, the R&D Tax Credit is not limited to scientists in white coats but any business investment in product or process improvement. Many businesses across the spectrum of industries could benefit from tracking their R&D activities, documenting their R&D expenses and claiming thousands of dollars in credits.
A CPA can help a client establish R&D protocols that meet IRS requirements for the credit and begin documentation at the beginning of the process. The CPA can help the client understand what costs are covered and what are not under the labyrinthine IRS provisions. Finally, when filing the client’s tax returns, the CPA can ensure compliance with all the nooks and crannies of the law.
Is that a big deal? The R&D Tax Credit is projected to save businesses $17.4 billion in 2024.
A CPA is a Trusted Business Advisor
CPAs are more than merely tax strategists: they are business partners who help reduce expenses and drive growth. CPAs can help business owners manage capital gains, defer income, time asset purchases and even restructure, all for tax savings. They can create tax-advantaged retirement plans and reclassify assets for lower taxes. For example, taking advantage of cost segregation of property can slash a business’s tax liability and boost revenue to invest into future growth.
Partnering with a CPA is like bringing into the business a tax strategy consultant whose advice and guidance is working all year to maximize savings and improve overall financial health.
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