When I first meet with a prospective client I love to see what ?story? the tax returns are trying to tell.
Typically, I?ll ask you what you understand your tax return to be, like whether you?re a corporation, a partnership, an LLC, or whatever?
I?ll even start asking you some of the hard questions like WHY you are what you are.
From here, I need to see the tax returns, all of them, Business and Personal, State and Federal? so I can see if your story plays out.
For instance, if you tell me that you?re an employee of your corporation, I?m going to ask questions when your corporate tax return shows zero compensation to the owner and your balance sheet says that you owe your corporation $500,000!
Or, I see , in addition to your corporation tax return, that you also have your own business? on your personal return, and you?re taking deductions there.
Or, you?re complaining about all the taxes that you pay for your S Corporation restaurant, and I see all the profit that you have, and it?s because your tax return very clearly says that you have $1,000,000 as CASH in your bank account, and you tell me that there can?t be any more than $10,000 in your bank account!
The ?story? has to play. Maybe that?s where my strength is, since I?m going to look at the big picture. Are we telling the State of New Hampshire (or neighboring states) a story consistent with what we?re telling the IRS, taking a reasonable compensation at the same time. In the end , it?s all got to be consistent.
When I?m sitting across from the auditor, I need to be able to tell them this ?story?, so it?s important that whatever the ?story? is, it needs to be credible. For instance, if your tax return says that you owe your company $200,000, you?ve got a loan document to support this. If I walk in the door, and you?re the owner, and introduce me to the ?president?, well that president better be an employee, and not a ?sub-contractor??
Do you know your story? Do you understand your tax returns well enough to know whether they tell the same story? Is your story credible?
Presented by Steven A Feinberg, CPA of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in tax, payroll and business planning for his clients throughout the year. Steve is a recognized member-contributor of the book, Six Steps to Small Business Success. For additional information, you are encouraged to email Steve at info@appletreebusiness.com or call (603) 434-2775.
Steven A. Feinberg ? www.AppletreeBusiness.com ? Get Appletree Blog via Email ? Follow CPAsteve on Twitter
Filed under: Uncategorized Tagged: | bookkeeping, Business, income tax, IRS, LLC, New Hampshire, S Corporation, tax deduction, worker classification
Source: http://blog.appletreebusiness.com/2012/12/14/when-your-tax-returns-need-to-tell-a-story/
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