9 Tips From Trip | Letting Your Financial Advisors Know What You Expect
In May or June of just about every year I hear individuals complaining that their “CPA/Accountant either did a great job of getting them a refund or didn’t.” I am always fascinated by those statements, given the fact that people expect their financial accountants to work miracles after the fact.
As I have told my clients, “if you want a good result in March or April of the following year, you need to work on getting that result in the prior calendar year.” What many people fail to realize is that you make history from January 1st to December 31st. You merely record it on March 15th and April 15th of the subsequent year.
So, what should you do? I have encouraged my clients to tell their Financial Advisors what they expect. Sit down and talk with your Financial Advisor, Accountant, Tax Lawyer, etc., and discuss with him or her what you would like to see accomplished.
Get a budget. Map out what you expect to happen in that calendar year. Make sure that your budget is in line both with your expenses and income. Have you set aside money for capital purchases, such as equipment, computers, cars, tractors, trailers, etc., or are you going to have to borrow it? (Debt is a killer!)
Meet at the early part of the year, not just at the latter part of the year. Plan what is going to happen, and then go make it happen.
How do you want to depreciate your business assets? As you know under Section 179, you can write off up to $1,040,000 of assets in one (1) year. Remember that in some businesses that are marginally profitable, especially in the earlier years, you do not want to take excessive depreciation and show continuous losses. The IRS interprets that to be a hobby loss.
As you age, and to the extent that you have a profitable business, you might want to look at being more aggressive in your retirement planning. Many of us have Profit-Sharing/401(k) Plans, that will allow you to put up to $55,000 a year in them. If you are over 55, have a small work force, and have good cash flow, you might think about being more aggressive, such as putting in a Cash Balance Account or a Defined Benefit Plan.
Do you have children that are looking for jobs? Why not employ them in your own business? Is your spouse working in the business? If not, hire him or her in the business, pay them a salary.
Have first, mid and year end meetings with your Financial Planners and/or have them look at your Profit & Loss Statements and Balance Sheets and make suggestions.
Good business practices do not happen by accident. They take careful planning, and oftentimes, if you do not have all the answers, it is good to ask someone who has training in income tax planning. Remember – you really don’t want a refund, or at least not a large one. A refund means the government has had the interest free use of your money for months.
If we can help you, give us a call.