By Carolann Lennox and Nathan Devey
Accountants and other tax professionals can be worth their weight in gold during tax time. With the Income Tax Act numbering more than 3,000 pages, the amount of rules and regulations can be painful to wade through. While some businesses may only require simple accounting and may not need an accountant for day-to-day bookkeeping activities, as companies grow and entrepreneurs look to maximize their business and household incomes, hiring a tax specialist or accountant is money well spent.
Accountants are experienced in tax law
Suppose you are informed of litigation being brought against your company. You may be confused, concerned, and possibly even angry. Despite these emotions, your first order of business is to contact a lawyer. Why? Because you know the law is complex and you want an expert to help you attain the best outcome possible.
Income taxes shouldn’t be any different.
Tax law is complicated by design (and arguably, necessity), and while most entrepreneurs have the gusto to tackle just about any complex issue, sometimes the cost-benefit trade-off just isn’t worth it. Sure, you may be able to hack together a set of bang-up financial statements for a meeting with potential investors, but when it comes time to file your taxes, do you really know every deduction available to you, what obscure tax laws may apply to you, and what tax breaks are available in current and future taxation years? Accountants are experts in these areas and can help you navigate the complexities of tax law, while keeping your best interests in mind.
Accountants can help prevent audits
Being audited once is a minor hassle. Being audited repeatedly is a major ordeal. If errors are noted in your tax filing, this is exactly what can happen.
The best way to prevent mistakes in an income tax return is to hire an accountant. Not only will your accountant reduce the likelihood of an audit, but you can rest assured knowing that everything is in order in the event that your business’ return is selected for audit. The chances are good you’ll be glad to have someone in your corner who knows your tax return better than you do.
Accountants can help you get and stay organized
You should be keeping detailed records of all of your revenue and expenses throughout the year, as well as keeping copies all of your receipts. Being diligent with this kind of recordkeeping makes it easier for an accountant to navigate your financials and identify savings opportunities.
Keep in mind, “navigating your financials” does not mean sorting through a year’s worth of paper receipts you’ve kept in a shoebox. Take advantage of accounting software and the online tools available to keep your records organized and easy to review. For example, QuickBooks Online can help you to manage your accounts, sync your bank accounts, manage your quotes and invoices, and run payroll and critical reports. Online apps like Expensify can help you digitize and log your expenses on the go, so that nothing gets lost, everything gets logged, and you can maximize any deductibles you are entitled to receive.
Accountants can answer your questions
Suppose your business is cash-flow positive and you want to extract some free cash to fund personal expenses. What are the tax consequences of paying yourself a salary versus a dividend? Or perhaps your business wants to make a donation to support a local charity group. Is there a way to maximize the tax benefit?
Accountants can answer these and a whole host of other questions, even before you know what to ask. As with any other type of law, complexity breeds opportunity. However, the insight of a tax professional can help you identify underlying possibilities that could save your business’ hard earned cash.
Accountants can help you plan ahead
Hiring an accountant during the current tax season is a good start. Tapping the expertise of an accountant year-round is even better because it puts you ahead of the game and in a position to stay on top of future tax seasons. Bringing an accountant into the picture early in the year gives ample opportunity to gain a complete picture of your company’s financial past, present, and future. Your accountant can then work with you to ensure you are and remain compliant as well as provide you with advice and information with respect to remuneration options, available credits, and deductions to make every dollar count.
Accountants can help you strategize
Should your shares be owned by a holding company? What is the best way to structure your business’ stock to minimize the tax impact of taking on new equity investors? Say your company’s capital structure is no longer appropriate due to recent changes in the business. Are there tax consequences to a share reorganization?
Tax planning is important for your business and equally, if not more important, for you as a shareholder. Seemingly innocuous decisions that are made in the early years of a business’ life can have a significant tax impact down the road when you sell or transfer your shares. A tax professional can provide you with the advice you need when you need it.
Accountants can help you maximize growth opportunities
Looking beyond the current tax season, accountants can align your company’s growth strategies with tax strategies. Accountants are attuned to tax industry trends as well as new developments and evolutions in tax law, which can help inform your decisions around things like incorporation, hiring staff, exporting to new markets or even mergers and acquisitions. Working with an accountant to maintain accurate and timely financial reporting will also provide you with the complete picture to make sound decisions on how (and when) to scale and expand your business.
Having an accountant lets you take control by letting go
When it comes to taxes, you might be surprised by how much you can gain from letting an expert take the wheel. Whether you are a new or well-established small business, your business success during both difficult and prosperous times can benefit from your accountant’s tax expertise. Hiring professional help can minimize your tax obligations, maximize your access to credits, and cement your financial story for when you are accessing funds to grow your business. Ultimately, you should focus your efforts where you can make the largest impact on your business and let your accountant do the same.