6 Questions You Should Ask Your Accountant
You don’t have to be an expert in taxes and accounting – that’s what you have an accountant for. Even though most business owners have a financial expert they can call, not all of them think about asking the right questions. Your CPA can solve many of your financial headaches for you if you reach out to them. Here we’ll explore six questions to ask your accountant during your next meeting or email exchange.
What’s My Break-Even Point?
One of the reasons to hire an accountant is to get your bookkeeping in order. Keeping a record of every transaction is great when it’s time to file your tax returns, but it’s also useful for evaluating your income and expenses as well as determining your break-even point.
The break-even point is often difficult to calculate. Not only do you have to consider meeting regular operating expenses in addition to the cost of producing the products or providing the services, but you also have to think about ongoing promotions, taxes, and other variables that affect your bottom line. Your accountant can provide you with a detailed financial picture and tell you how you can achieve the highest profit margins.
Which Records Should I Keep?
It’s a good idea to keep all financial records unless your account tells you it’s okay to get rid of them. The IRS could audit your company several years after the taxes have been filed and paid, which is why you need to archive old remittances and returns, too. You should definitely keep track of any tax remittances, employee wages, documents related to the purchase and sale of assets, as well as revenues and operating expenses.
It’s fine to keep your records in electronic form, although it’s a good idea to keep backup copies. When you store your records in digital format, you’re preventing data loss through theft, vandalism, or fire. However, you still have to add safeguards to reduce the likelihood of getting hacked or losing all your information if a server crashes.
Which Expenses Can Be Deducted?
One of the perks of running a business is deducting certain expenses from your taxable income. These deductions include the home office deduction, business use of a vehicle, and travel. It’s important to keep adequate receipts or mileage records to substantiate your deduction. There are some exceptions to these rules, too. For example, while you can deduct flights and hotel costs when traveling, you may not deduct the cost of your commute to and from work. Your accountant will go over your expenses with you to help you figure out which portion is deductible on your tax return.
Am I Paying Enough in Estimated Taxes?
When you’re self-employed or running a business, you may be required to make estimated tax payments. Generally, you’ll have to estimate your total tax liability for the current year and pay a quarter of that amount every three months. Your tax liability for the current year may be lower than last year’s, but it’s important to double-check with your accountant. Not paying enough means you’ll have to pay a bigger lump sum next April. You may also be required to pay penalties for not making the right amount of estimated payments.
Are the People Who Work for Me Employees or Independent Contractors?
You must withhold taxes, Social Security, and Medicare payments from your employees and submit these taxes to the appropriate tax authorities. You’re also required to file quarterly reports, and you must provide your employees with a W2 at the end of the year. With independent contractors, you only have to issue a form 1099 at the end of the year. The independent contractor is responsible for making their own estimated tax payments.
While there are certain advantages to having independent contractors over employees, you don’t get to choose. The classification rules are strict, and your accountant can help you figure out the gray areas.
How Can I Grow My Business?
Your accountant can’t tell you how to make a better product or provide a better service, but they can give you sound financial advice about growing your business. Whether you’re interested in purchasing more equipment, hiring more employees, or expanding your marketing efforts – your accountant will run the numbers and projections to help you make better business decisions.
Our accountants are here to help you answer other questions, too. Give us a call or send us a message through our contact form to get in touch!