The holidays are over, but there’s no lull for the state’s CPA firms as they dive into the tax season and changes in tax laws going into effect in 2008.
Angela G. Fisher with GranthamPoole in Jackson says December and early January are a busy time. “In December we work with our clients to analyze and project their tax position for 2007, she said. “This process is invaluable as it helps clients plan for the tax bill that is due April 15, and, more importantly, arms them with information necessary to make good financial decisions before the end of the year.”
Planning and preparation
In January the firm tends to internal housekeeping details that include updating tax preparation software and additional training for staff members.
“We want to make sure everyone is up to date on the latest software and tax law changes,” Fisher said. “Additionally, we begin contacting clients for information to close out 2007 and begin the tax return preparation process.”
Non-profit organizations should be aware that the Internal Revenue Service (IRS) will be watching more carefully this year, according to Deanne Tanksley, a CPA in the Natchez office of Smith, Turner & Reeves, who does a significant amount of work with these groups. There’s a new tax form with changes for the 2007 filing and more changes on the way for 2008.
“There are now questions about the whole board, not just the officers, that we haven’t answered before,” she said. “Non-profits should know that the IRS really does scrutinize the make up of these organizations as a watchdog to make sure people’s money is handled properly. Often people get involved with these organizations and do not understand what’s going on.”
She finds that sometimes non-profit board members don’t do their homework and can pay a hefty price. For instance, a board with too many relatives on it might raise questions with the IRS.
Tanksley also works with governmental groups and prepares for the new year by reading the new yellow book of standards. “We can not be stagnant and must always be paying attention,” she said. “The new forms are incredibly long with a lot of responsibility revolving around risks.”
Those risks include backup plans for computer systems and what to do in natural disasters such as hurricanes and tornadoes. “We have some small clients who haven’t had to do this before and now they must put these things in their audits,” she said. “It’s forcing all of us, and rightly so, to look at what can go wrong.”
Ready to go
Juliette Mays with The Byrne CPA Firm in Houston advises business clients to have their information ready for tax time. “It’s easier to assist them if we do the work for them semi-annually or quarterly. They could save a lot of money if they would work with us throughout the year,” she said. “We try to make sure what we do is cost efficient for them.”
She also advises business clients that budgeting is extremely important along with retirement planning. “We make sure the owner understands what his costs are and how they affect the bottom line,” she said. “How to control those costs and use their time wisely for the growth of the business and not counting the pennies is sometimes difficult to make an owner understand.”
She and other members of the firm go to businesses for face-to-face meetings, something they feel is important. “We found out our clients like the personal touch and don’t want to do business by phone and e-mail,” she said. “A lot of things are changing in technology, but we’re sticking with the old tired and true methods.”
Mays says payroll is a big issue with a lot of small businesses. “A lot think they must pay everything in salaries and pay taxes on it,” she said. “For corporations, we tell them they can do some of it in distribution without paying taxes on it.”
At GranthamPoole, Fisher anticipates some client education about Hurricane Katrina provisions expiring this year — provisions that have been helpful.
“Additionally, though Congress has put a band aid on the Alternative Minimum Tax (AMT) that is affecting more and more of our clients, the band aid is not as big as we had hoped,” she said. “Some will see a larger tax bill because of this attempt to make sure everybody pays their ‘fair share’ by way of AMT. The good news is that many partnerships and LLCs owned by spouses will no longer require a separate partnership tax return.”
To help small business clients prepare for tax time, she and other CPAs at the firm discuss various tax savings opportunities, such as funding a retirement plan contribution for their employees after January 1 but deducting the expense on their 2007 return, analyzing the depreciation options available on equipment purchased in 2007 and asking questions about any business expenses or mileage that may not have been reimbursed.
Contact MBJ contributing writer Lynn Lofton at email@example.com.