Betty Beauty quit her full-time job and opened a full-service hair salon in 2018. It looks to have been a great decision because her salon has been in such high demand that clients are frequently on a waiting list! Her focus has been marketing and providing an exceptional client experience so she never seems to have the time to manage her records and books.
Fast forward to April 2019. “Tax Time!” seems to have snuck up on Betty. She has heard that CPAs are expensive, and besides, her business “isn’t big enough” for a CPA yet. So, she calls her friend Tina Taxation who does taxes for her family on the side. Tina tells Betty that she can just estimate what the business deductions should be – “everything will be fine.” Tina files Betty’s tax return which shows that Betty is due a refund of several thousands of dollars. Betty is so excited that she tells Tina that she will be using her for next year’s tax return and going forward. In July 2020, Betty gets a letter in the mail from the IRS. The IRS is requesting support for all of the business deductions on the 2018 tax return. Betty frantically calls Tina, who unfortunately has no advice for Betty. Betty mentions the issue to one of her closest clients, who then urges Betty to call a CPA ASAP because IRS letters have a firm deadline.
Betty takes a few days off of work to focus on the matter at hand. She calls a CPA who can help her work with the IRS to resolve the 2018 tax audit issue. The CPA also helps Betty by amending her 2019 tax return and advising her on managing her books and records. Betty is grateful to the CPA for helping her through her crisis, but she is also bummed at herself for not calling a CPA in the first place. Saving a few dollars upfront bit her in the end with accumulated tax penalties and interest. Needless to say, her friendship with Tina will never be the same. Don’t be like Betty.
What is a certified public accountant (CPA)?
Texas CPAs have surpassed the hours required of a baccalaureate degree, passed a rigorous, four-part exam, and are required to meet a minimum of 20 hours of continuing professional education each year.
How can a CPA help small businesses?
A CPA can help you get started on the right foot and continue on the right foot.
- Business Advisory Services: When starting a small business, taking the time to set up your recordkeeping system properly, right from the beginning, will save you time and money down the road — and could make the difference between success and failure. Good recordkeeping – at all stages of your business – can:
- Facilitate accurate and efficient tax preparation, saving you taxes, interest charges, and penalties
- Give you a better picture of your business’ financial health
- Help your CPA identify financial and tax planning money-saving opportunities
- Business Entity Formation: There are a few choices in selecting your business legal structure. CPAs are instrumental in helping you find the business structure that will work best for your particular circumstances. As a business owner (new or existing business), your business and personal finances will be closely related. Your personal needs and expenses should be considered when determining which legal structure will work best for you from a tax perspective. As circumstances change, your business structure may need to change as well. A CPA can run some modeling to determine the best structure for YOU.
- Planning/Forecasting: Sound planning is one of the most critical factors in the success of your business at all stages. Your plan should be adjusted regularly to match your actual performance. CPAs know that for most small business owners, time is your most scarce resource. Conducting a monthly or quarterly financial health checkup with your CPA can give you the freedom to focus on what you do best while your CPA works on identifying and correcting problem areas before they become crises.
Sheryl J. Jimerson, CPA, EA
Jimerson Tax and Accounting, LLC
Office: 346-206-2957 | Email: JimersonCPA@gmail.com
Visit us at JimersonCPA.com