By Jim Kendall
This column originally appeared in the March 21, 2016 Daily Herald
Your business taxes are filed – the deadline was last week – and you and your preparer can get on with completing your household tax information. Or, if you’re a tax DIYer, you can finish up your personal forms.
Of course, the need to manage and to the extent possible control your business’ taxes never ends – which is why I asked Greg Galla to offer some insights that could make the 2016 tax process easier. Galla is a CPA at GLM Inc., a Schaumburg accounting firm that focuses on small and medium-sized businesses, generally those with sales up to $10 million.
Among his observations:
* We’re generally not so good at separating business and personal expenses. Perhaps surprisingly, Galla says “That’s the biggest problem we see in small business tax materials. There’s a lot of cocktail conversation, or chats with a neighbor, about ‘Yeah, that’s expensable.’
“But it’s not.”
* We know how to run our businesses, Galla says, but we don’t know what we don’t know about accounting and taxes. That creates preparation issues, especially “When it’s February and (business owners) say ‘Here’s my stuff.’ We often don’t have time to fix a tax problem that was created in June.”
Better, Galla says, is to make a phone call when issues that could impact taxes arise during the year.
* Better still, Galla says, is a series of regular reviews with your tax advisor during the year. Monthly, quarterly or semi-annual conversations are better than what most of us do about in-year tax planning, which is nothing.
Most CPAs prefer monthly meetings, but many business owners don’t want to spend the dollars. Yet tax issues not caught earlier cost time and money during preparation “when we have to spend time, and overtime, cleaning them up when preparation begins,” Galla says.
It’s true that most of us don’t want to spend the time, and especially money, meeting with our accounting people during the year, even though such meetings can keep minor issues from becoming major headaches. It’s also true that many accounting firms don’t push the issue.
There’s plenty of topics to discuss.
A Bankrate.com article titled “A Dozen Deductions for Your Small Business” covers such possibilities as a home office, deductions for which can be dicey; furniture and other equipment; mileage, including a bit of a break if you have a home-based business; and what the article refers to as child labor. If your business structure qualifies, there are some nice breaks for hiring your kids. (www.bankrate.com, click deductions and go to the article.)
Articles aside, GLM’s Tom Gosche, a business strategist with business development responsibilities, is an advocate of regular advisor-client meetings.
“One-on-one,” Gosche says. “We can look together at where you’re spending money – and why. We’ll look at revenues. Are they different than last year at the same time? Better or worse? Why?”