2020 has been an interesting year for businesses, as some have grown, others have been heavily affected by the pandemic. Today on ABC4 Utah we have a local expert – Ron Valentine joining us from Valentine CPA.
Ron tells us that according to statistics he shows that 9 out of 10 businesses fail miserably in the first year and there are many reasons for this. One of the reasons Ron sees is that business owners are distracted by their priorities.
There are 3 important pillars that business owners need to focus on. Some pillars are more important than others. The most important thing, according to Ron, is the operations. Operations are their product or service. Companies really need to pay attention to this. The need to have large operations that sell great products and provide stellar service.
The next pillar that business owners need to focus on is their marketing. It is their cornerstone. A business may have the best product or offer the best service, but if no one knows, their business will suffer.
Finally, the last pillar is their accounting. What is their payroll compliance, accounting and tax strategies.
The first two pillars are vital, and much like breathing. Doing your accounts is different from the vital need to breathe; it’s more like fixing a broken arm. Both are important, but one is vital. Ron has found time and time again that small business owners who understand their priorities, work on the first two pillars, and take the burden off their books tend to be successful. Even though companies want to do their own bookkeeping in-house, payroll compliance is so complex that I really suggest they leave it to their accountant.
Some small business owners use a CPA for their taxes, a payroll company for their payroll, and a separate accountant. All of these functions are part of the overall financial well-being of the business and they reach their climax now when the tax return needs to be prepared. For example, the CPA preparing the tax return needs to know what information the accountant has on the basis of profitability, different tax strategies should have been used.
Also, depreciation of assets is an important part of tax planning and software like QuickBooks does not have an asset manager, so many accountants who simply understand the keys of using the software miss a point. key element of tax planning. Tax planning must also be integrated with payroll.
In addition, tax planning must be integrated with payroll. To get a tax deduction, you have to spend money. The best way to spend money is on yourself. This is why small business owners need to incorporate retirement plans into their tax strategies. The best retirement plans should be integrated through the payroll function. Planning should be done before the end of the year. Most tax preparers get the information after the fact. It is as if the accountant was counting the dead at the end of the battle. Small business owners need an accountant to help them fight the battle.
As Ron mentioned, pensions are good if they are well established. Typically, anything you spend on the business that helps you generate your profits is a tax deductible expense. You want to spend on things that will grow your business. Some expenses missed because they don’t really come out of the company’s checkbook are mileage deductions and a home office. The IRS requires a contemporary mileage log. The home office can be a useful deduction if done right. The IRS has proposed a simplified method, but in all cases, as we have seen, the deduction is lower than using the old method to obtain square feet and ensure that the depreciation of the house is included.
For more information you can visit the Valentine CPA website, call their office at (801) 444-3710 or send an email.
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