It is a mistake to believe a CPA can do your thinking for you. In the context of your business, you are irreplaceable. You as a decision maker, owner, or key manager provide the context, constraints and conscience of your business which inform and guide the thinking of the professionals you engage. These considerations mean the proper relationship between a client and an accountant is one of active and meaningful engagement and not merely the passive transmission of tax tips and returns.
Here is how you can help yourself with your business and taxes:
Keep Good Records
Few things can help you more than keeping all business receipts, documenting business auto use, reconciling business bank accounts, and avoiding commingled personal and business funds.
In the judicially established Cohan Rule business records that have been lost or destroyed may be reconstructed following a rule of reason. However, certain other categories of records (such as meal and entertainment expenses) are subject to stricter documentation requirements. But the bottom line on this subject is very clear: There is no substitute for diligence and good record keeping.
Exercise Prudent Skepticism
There are many shady operators out there. Be careful! If someone gives you a tax tip that sounds too good to be true it probably is. Some of the things you can do to reduce your tax burden are obvious. Some are not. If a tax professional leads you astray you remain responsible and you alone will be the primary target of the IRS.
Question professionals who tell you something you don’t understand or that doesn’t make sense to you. Ask them to substantiate their assertions with reference to tax laws, regulations, court cases or other substantial legal authority. If you have a major tax issue and what you are being told still doesn’t make sense get a second opinion.
To avoid any charge of self-promotion I will merely cite the IRS’s own guidance on how to choose a tax preparer. See:
Beware of Scams and ID Theft
The internet is rife with a wide variety of scams. One of the most notorious tax scams involves a purported email from the IRS sent to unsuspecting victims which demands confidential information:
The IRS NEVER contacts taxpayers by email.
Protect Sensitive Business and Personal Records
You can further protect yourself by shredding or burning all unneeded records. The cost of shredders and similar expenses may be deductible as a business or employee expense. How long should you keep records and returns? The bare minimum period aligns with the minimum three year statute of limitations applicable to filed returns and is four years. The maximum aligns with the longer (and rarely applicable) six year statute of limitations and is seven years.
Make the Call
Finally, one last element of self-help is to reach out to a competent professional whom you trust and respect. This is a phone call that may change your life and the future of your business.
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339
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