Over the last few weeks, I’ve been busy breaking down complex elements of the tax code and Internal Revenue Service (IRS) regulations. Have we been answering bits and pieces of the question, “What is tax compliance?” Or is it something else?
So far, we can depreciate property. We know what the safe harbor rule is. We’re tuned up with accounting practices that lay the groundwork for tax deductions in the future. All of what I’m talking about is tax planning. In fact, I can break it down better for you: planning.
So, what is tax compliance? And why is a tax compliance mindset bad for small businesses?
Tax compliance is one step in a bigger process
Yes, you need to file your taxes in a manner that is in accordance with laws and regulations put forth by the federal government.
It’s an “of course, you do” service, and the problem for business owners is the tendency to take the entire process of tax reduction, asset protection, and tax-efficient retirement and distill all that value down to a form.
Forget forms. Think about the function.
Forms are paper (or once were) where a person or company writes or types in a given response to a given question. The form (and I’m talking about tax compliance) is an illusory structure.
Bad CPAs take what a form says on its face. OK, this goes here, and this goes here.
Good CPAs see the form for what it really is: the dotted line where years of tax planning and accounting work are realized. Line “XX” of form “Y” can grow your business, or tank it, or just keep things the same.
What kind of business owner are you? Compliant or competitive?
Tax savings come from the 3,000 meters of iceberg below. That’s tax planning. That’s real tax work. Tax compliance is what you see peeking above the waves.
I’m asking you to break out of a must-know “what is tax compliance” mindset and see the opportunities below the water line.
You’ve built a business. You know that purpose comes before the task. So, in taxes, the purpose is to keep as much of your gross revenue and do so in a manner that is allowable under the law. Purpose before task. Planning before compliance. Think about it.
Schedule a consultation if you want to get serious.
Talk soon,
Jeremy A. Johnson, CPA