Tax season often highlights the riddle of tax code intricacies and compliance. This is especially true for businesses. Many small business owners assume that because they work with an accountant, they are covered, but accountants and tax attorneys serve different roles both of which are important and strategic.  Whether you are a start-up or an established entity, it is never too late (or too early) to engage with a legal partner who has experience with tax law to ensure that you are mitigating risk and maximizing your deductions and credits. To best align your financial goals and financial interests, initiate collaborative conversations between your accountant and attorney, so they are working together as a cohesive team for you and your business. Here are three key reasons why should consider engaging with both for your small business’s financial management:
- Complexity Demands Expertise
Tax laws are inherently complex, constantly changing, and highly nuanced. While accountants will organize, document, and prepare your financials, legal professionals who specialize in tax law have the experience and tools to monitor, interpret, and apply these tax laws to your specific business. Likewise, accountants can advise on deductions and credits to minimize your tax liability, but legal advisors will assess your business structure, financial situation, and long-term goals to optimize your tax position. This personalization can result in significant savings and ensures that you are making informed financial decisions for future growth.
2. Complexity Demands Expertise
Compliance with tax laws and deadlines is non-negotiable for businesses. Failure to meet deadlines or comply with regulations can result in penalties, fines, and legal repercussions. Your accountant should also properly track all financial transactions such as receipts, income, deductible expenses, and wages to ensure that you have the proper documentation to substantiate your tax filings. Should you find yourself responding to an IRS inquiry, your tax attorney can provide invaluable support to guide you through the audit process. Your tax attorney will make you aware of any tax law changes, such as new statutes that could affect your business. As a small business owner, there is more to consider than just running your business, such as succession and estate planning. Do you know the tax implications when you transition out of your business? Who will take over the business if you are incapacitated? What if you decide to sell the business? The right legal partner will specialize in working with business owners and their accountants to minimize the tax implications for your long-term goals. Additionally, having a legal advocate during an audit can make a significant difference in the outcome and minimize potential financial repercussions. Proactively engage with your legal partner, so that if you face an audit, they are already familiar with your business, saving both time and money in an already stressful circumstance.
- Internal Controls and Securing Sensitive Information
Establishing strong internal controls is crucial for protecting your business during tax season. Both your accountant and tax attorney can provide guidance for implementing rigorous accounting practices, segregating duties among your staff, and conducting regular audits of financial records. This not only minimizes the risk of errors in your tax filings but also acts as a deterrent against fraudulent activities that could jeopardize your business. Because both accountants and tax attorneys have multiple clients, they can also keep you informed of best practices and threats that could compromise your business’s financial security. For example, when was the last time you reviewed your cybersecurity measures and insurance?
Tax season presents both challenges and opportunities to optimize your small business’s financial practices. Proactive planning and the right legal and accounting partnerships can mitigate risk, lead to long-term growth strategies, and maximize your corporate wealth management.
