Why Tax and Financial Professionals Need Greater Transparency
The US tax code is frequently one of the most complex aspects of running a small business. That’s why hiring the right tax and financial professionals is crucial to your company’s success. That said, they can only operate at their full capacity if you offer them complete transparency.
Shoot straight with your CPA.
- Be open and honest about any pertinent information regarding your finances. Same goes for your lawyers.
Be meticulous with payroll taxes.
- Even if you’re a small business, as long as you’re incorporated, you need to manage payroll checks – with withholdings – as if you were a larger entity.
Equity stakes are taxable.
- If your attorney or business planner suggests sharing shares of the company, you need to communicate that with your advisors because those equity stakes can be taxable – either as a gift to a family member, or as income if it’s for an employee.
Communicate tax harvesting.
- This just means coordinating your investments with your taxes. It’s all too easy to lose carry forwards on your tax return, or not to receive gains because of fear of paying taxes even though you are in a lower tax bracket and are eligible for good breaks.
Generational tax planning & real estate.
- You can’t just leave your business to your children without consequences. Especially if your business is worth a lot, you will run into issues with state taxes, in addition to potential income taxes later. When you receive a gift such as real estate, your tax cost will be the same as when it was with the donor. This is called “carry over basis” and the older the real estate, the more expensive it will be for the recipient.
For all of these reasons, don’t leave your accountant in the closet and communicate as openly as possible with all of your advisors about your taxes. Doing so will ensure you don’t run into any trouble with the IRS, and pay as little taxes as possible.
John Napolitano, Chairman and CEO of U.S. Wealth Management, discusses how integration and openness is vital to tax and financial management.