For many small businesses, their company’s financials manage cash flow or is the basis for reports prepared for shareholders or loan agents. Did you know that there is another way you should be looking at your books?
There is, it is called Tax Accounting. Tax accounting focuses on the impact of your financials on your taxes and is governed by the IRS, not the SEC.
Read on to understand everything you need to know about tax accounting.
The Ultimate Guide to Tax Accounting
While certified public accountants deal with all of your companies financials, most accounting firms have accounting that focuses on either Generally accepted Accounting Principles (GAAP) or Tax Accounting.
Tax accountants focus, specifically on those line items associated with calculating how much you owe in taxes and preparing your tax forms annually. They also help you determine the amount of taxes you may owe on a quarterly basis. Meet our team and learn about their specific qualifications.
As an example, your balance sheet, which is a report that lists your companies assets and liabilities, can be prepared for a loan offer OR the IRS. The accounting for each is different.
In Tax Accounting you can use the last-in-first-out (LIFO) approach, NOT the first-in-first-out (FIFO) method to document your inventory. The LIFO method reduces your tax liabilities.
Tax Accounting and Small Business Tax Accounts
Tax accountants can also help you set up your books to take advantage of tax incentives. As your company grows and begins to make more money, you will be looking for the right place to invest your profit.
Do you invest it back into the company, into expansion, into employee profit-sharing or 401Ks? All of these business decisions come with tax implications. Your tax accountant can help you to best understand what impact each of these decisions has on your companies bottom line.
They can also ensure that you are taking full advantage of tax rebates, credits, and deductions you may be entitled to. NOTE: tax incentives in all forms are designed to stimulate the economy. These incentives vary in duration, some are one-time, some are only for a limited time, and some are in place permanently.
Because of the nuances of tax laws, you should look for a tax accountant near you. While all tax accountants understand federal law, local tax accounts best understand state or local laws and tax implications.
Do You Need Help with Tax Accounting?
We are here to help, our qualified team can help you turn your financials into a tool to help your company grow, and limit its tax burden. We can teach you basic accounting, how to use Quickbooks, and ensure your taxes are prepared by an accountant qualified in tax accounting. Only they can ensure that you are paying, only, what you owe. Ready to get started? Contact us, during our initial call we can discuss your needs and how we can support you, and your small business.
Learn how Sterling Tax & Accounting can add value to your business!
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