A checklist for tax talks

Nation's Business, Feb, 1997 by Peter Weacer

Accountants who work primarily with small businesses say owners often don't keep them sufficient informed about business and personal financial decisions. And poor communication often has costly tax consequences.

For example, maybe you're thinking of buying some business equipment in the fall. But holding off until the following year may be a smarter tax strategy "because you might need some extra expenses to offset anticipated growth in profits," says Roger Harris, president of Padgett Business Services, a franchisor of accounting and tax services, based in Athens, Ga.

Moreover, you should talk with your accountant on a regular basis, not just when you're about to make a major financial decision. You shouldn't wait until March to start talking to your accountant," says Harris, "because you could miss out on some valuable tax savings."

Says Douglas Stives, a CPA with C,urchin & Co. in Red Bank, N.J.: "I tell my clients to call every quarter when they do the work on their sales- and payroll-tax deposits."

Both Stives and Harris suggest that the business owner draw up a checklist of topics for discussion. Here are items they say should be on the list:

* Is there any change up or down in your sales, expenses, or expected profits that might require a change in tax planning?

* If you're thinking of acquiring new equipment, should you purchase or lease? Should you get the equipment now or wait until the beginning of next year?

* Are there important changes in your personal finances? Do you expect that more money will be coming in because your spouse has a new job or you are making more money with your investments?

* Are there financial moves you can make now to benefit your estate plan?

* Is your business structure (sole proprietorship, corporation, or partnership, for example) the best for your current or expected needs?

* What about your salary? Should you be putting more money aside for retirement? If your firm is a corporation, should you tee taking more money in dividends?

* Do you know what your business and personal tax liabilities will be? Will you have enough cash tn cover the required payments?

* What about your retirement plan? Should it be revamped so you can put away more tax-deferred money?

* What about changes in the tax law? Are you aware of new deductions and credits that are now available? For example, Congress reinstated the tax deductibility of employer-paid education costs for employees.

"Your accountant may be keeping up with all the changes in the tax laws but may not be keeping up with all the changes in your business and private life," says Harris. "And that's why you've got to keep in touch. It really pays off."