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Tax Prep vs. Tax Planning

If you run a small business or are self-employed and pay taxes annually, you might be missing out on savings due to inefficient tax planning. Paying your tax bill all at once at the end of the year might seem straightforward, but it can lead to poor cash flow and those dreaded IRS penalties.

In this article, we’ll explore the difference between proactive tax planning with a Certified Public Accountant (CPA) and the more reactive process of tax preparation. If you’re not sure where to start, a CPA can help you get organized and ensure you’re not overpaying—or underpaying—your taxes.

❓ What Is Tax Preparation?

Tax preparation is the annual ritual of getting your tax return ready. It involves gathering all your financial documents and organizing them according to the latest IRS guidelines. This once-a-year task is purely transactional and doesn’t offer ongoing advice that could help lower your taxes, especially when compared to the continuous nature of tax planning.

Depending on your industry and experience, tax preparation can be time-consuming and stressful. It’s best to start early, but even then, tax prep often doesn’t give you the flexibility to maximize your savings. If the complexities of tax prep leave you frustrated and overwhelmed, you’re not alone.

❓What Is Tax Planning?

Ever find yourself filing taxes in the spring and hearing, “You should’ve called me last year to save some money”? That’s where tax planning comes in.

For those owning a pass-thru business, your tax bill is tied to your personal IRS1040 return, based on your business profits. Many businesses wait until taxes are due and pay in a lump sum, but this approach is far from efficient. It can even lead to penalties if you owe a significant amount.

Tax planning is a proactive approach, where you estimate your tax liability throughout the year by tracking income and expenses. This ongoing process allows for regular adjustments and recommendations that can reduce your taxable income before the year ends. Regular consultations with your CPA throughout the year are essential for staying ahead of the game. Efficient tax planning can boost your cash flow and keep more money in your pocket.

For instance, if a company waits until the end of the year to prepare taxes, it might have overspent throughout the year. In contrast, ongoing tax planning allows you to manage taxable income wisely, pay only what’s required, and maintain better cash flow for wealth planning.

❓ Why Is Tax Planning Beneficial?

Tax planning is crucial for any business. As mentioned earlier, ongoing planning alleviates cash flow stress when taxes are due in April and maximizes tax efficiency by legally lowering your taxable income throughout the year.

Moreover, tax planning gives you control over when and how you pay taxes, potentially reducing the overall tax burden. When done correctly, tax planning is the most reliable way to manage your business finances.

❓ What Can a CPA Firm Do?

Certified Public Accountants (CPAs) are experts in all things tax-related. They stay up-to-date with the latest IRS regulations and work closely with businesses like yours to offer ongoing tax planning strategies. With a CPA by your side, you can ensure you’re only paying the taxes you owe—and not a penny more—while also exploring tax deferral strategies to save even more.

CPAs are well-versed in federal tax laws and can offer guidance that helps you avoid missed deductions or costly penalties. By outsourcing your tax planning to professionals, you can focus on your day-to-day operations while knowing your finances are in good hands.

Tax planning isn’t just about meeting your tax obligations; it’s about creating a financial strategy that supports your business goals. With a qualified CPA team, tax planning can lead to significant savings and even help grow your wealth.

Why give the IRS more than you have to?

At Insogna CPA, we believe tax planning is a year-round strategy. Don’t wait until the last minute—reach out to us today and start saving with a personalized tax strategy that works for your business in 2024 and beyond.

How to Create a Business Budget for Your Startup

As you piece together your budget, it’s not just about the numbers—it’s a chance to gain a deeper understanding of how your startup operates. Once you can better identify how much money you have on hand and where it’s going, you start to better understand things like:

✅ The actual money you’re spending on labor and other materials necessary for your products and services.
✅ Your overall costs of operations.
✅ The level of revenue you’ll need to generate to support your business moving forward. A realistic idea of how much money you can expect to make in terms of profit, and when.

So, as you work to come up with a budget that is more specific to your growing startup, you also begin to better understand how that startup works. At that point, you’re not just in a position to make accurate, informed decisions about things like hiring or materials spending ‒ you can also go back and reconfigure your budget to account for any trends or patterns that you’ve discovered. This cyclical process is also a great way to make sure that you always have the cash necessary to take advantage of opportunities as quickly as possible, even ones that you didn’t necessarily expect.

The “Day One” Budget

Let’s say you’re building a budget for a startup that hasn’t launched yet. Your focus here is simple: make “Day One” happen. While every business is unique, a few critical factors should be top of mind to ensure a smooth opening:

💡 Facilities Costs

Where will your business call home? Whether it’s a rented storefront, commercial office space, or a warehouse, consider all expenses—from security deposits to necessary renovations and signage.

💡Fixed Assets

These “capital expenditures” are the tools your team needs to get the job done. Think work vehicles (if applicable), office furniture, and essential equipment like computers—after all, your team needs a solid workspace.

💡Materials and Supplies

This includes everything from basic office supplies to marketing materials. Stocking up on these essentials will help your business hit the ground running.

💡Miscellaneous

Finally, there are those other expenses that don’t fit neatly into the above categories. Legal fees, financial consultations, licenses, permits—all these add up and are crucial to your startup’s foundation.

Remember, these are just the startup costs to get your doors open, not the long-term operating expenses.

🚩 Get It Right from the Start

Feeling stuck or overwhelmed?

We’re here to assist. We can help craft a budget that not only supports your startup today but also positions you for growth in the future. Let’s ensure you’re ready for both the present challenges and the exciting opportunities that 2024 will bring.

Take the first step towards securing your startup’s future—schedule a consultation with us today!

11 Business Tax Deductions in 2024

When tax season rolls around, every business owner starts looking for ways to minimize their tax bill and keep more of their hard-earned money. Knowing which business tax deductions you can claim is key to ensuring you’re not overpaying. While office supplies are a given, there are several other deductions that might surprise you and significantly reduce your taxable income.

Whether you’re a seasoned entrepreneur or just starting out, these deductions can make a real difference in your bottom line. In this post, we’ll break down 11 essential business tax deductions you should consider claiming on your taxes this year. Taking advantage of these deductions can help you lower your tax liability and reinvest those savings back into your business.

Pro Tip: Don’t forget to check out our 2024 Business Tax Prep Checklist for a smooth tax season.

💡 Here's other things you might be able to claim on your taxes

✅ Retirement Plan Contributions
✅ Health Insurance Premiums
✅ Marketing Your Business
✅ Business-Related Insurance Premiums
✅ Legal and Professional Services
✅ Home Office Deductions
✅ Auto Expenses Related to Your Business
✅ Office Supplies
✅ Licensing and Taxes
✅ Your Cell Phone
✅ Self-Employment Tax

Need Help?

Taxes can be tricky, but they don’t have to be. Let’s talk about your specific tax needs and find every business tax deduction you’re eligible for. Schedule a free consultation today, and let’s make tax season as stress-free as possible.

How to Deduct Meals and Entertainment in 2024: What Every Business Owner Needs to Know

In 2024, businesses can still deduct 50% of the cost of business-related meals. The temporary 100% deduction that applied in 2021 and 2022 is no longer available, so it’s back to the usual rules. If you’re a business owner looking to cut down on business expenses, understanding these deductions is key.

To qualify for the deduction, the business owner or an employee must be present when the food or beverages are served. And keep in mind, the expense can’t be lavish or extravagant. The IRS defines a restaurant as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether on or off the premises.

What's Excluded?

Meals bought at grocery stores, convenience stores, or any place that mainly sells pre-packaged goods don’t count. Even if your company operates an eating facility, it might not qualify as a restaurant, especially if it’s run by a third party under contract.

And remember, meals for personal reasons, even while traveling, aren’t deductible. However, if you’re on a business trip, most meal expenses can be classified as business costs, provided the trip is primarily for business purposes. If the trip is mainly personal, only those expenses directly related to the business activity are deductible.

How to Qualify?

Starting in 2024, your business can generally deduct 50% of the cost of business meals if:

✅ The business owner or employee is present.
✅ The meal cost isn’t “lavish or extravagant.”
✅ The meal involves a business contact, such as a customer, employee, vendor, or consultant.
✅ The meal has an “ordinary and necessary” business purpose.

Remember, entertainment expenses aren’t deductible, so if you’re at a sporting event, for instance, you can only deduct the meal costs if they’re billed separately, like a catered meal delivered to a skybox.

For more details on these rules, including recordkeeping requirements for business meals, check out IRS Publication 463, Travel, Gift, and Car Expenses.

Need Help?

Struggling to navigate the maze of meal and entertainment deductions for your business? Contact us today. We’re here to help you trim down your business costs and keep more money in your pocket—legally. Let’s make your 2024 tax season a breeze!

Why Hiring a Licensed CPA in 2024 is Crucial for Your Business

Take it from a licensed CPA, there are plenty of honest tax preparers out there. However, many are not.

Below are just a few of the fraud-related news stories from recent years about unlicensed tax preparers committing fraud. From all over the country and all walks of life, these “tax preparers” knew what they were doing. Unfortunately, their clients did not.

If you need any more reason to hire a licensed CPA, consider this: when unlicensed preparers make mistakes, you are the one who will pay for it—in fines, back taxes, and possibly an audit. In most cases, they do not sign your tax return; you do. So, unfortunately, there is no recourse for you.

Avoid unscrupulous tax preparers who include errors or false information on a tax return that could leave you open to liability for unpaid taxes, penalties, and interest.

❗Tax Preparers Committed Fraud

“It’s not hard to fall for a fraudster when you’re looking to get your taxes done on the cheap,” says Chase Insogna, CPA and founder of Austin-based Insogna CPA. “Fraudsters say they are registered tax preparers, but the common person may not know the signs to look for.”

The Warning Signs

Here is a list of warning signs to help you spot a fraudster quickly:

⚠️ If you do not see a current registration certificate and proof of business license, walk away.
⚠️ Tax preparers should provide clear information about how much they will charge and provide a receipt.
⚠️ They should also provide you with a required written disclosure and contract.
⚠️ A ghost preparer is a person who prepares your taxes and doesn’t sign the form. This is against Nevada law and the IRS. A ghost preparer is likely unregistered and you won’t see them again. If they don’t sign the form, don’t pay.
⚠️ Claims they are endorsed by the IRS. The IRS does not endorse tax preparers.
⚠️ Doesn’t have a PTIN. Anyone who prepares federal tax returns for a fee is required by the IRS to have an individual Preparer Tax Identification Number (PTIN) and include it on federal returns.
⚠️ Paid tax preparers are required to sign your returns. Beware if they sign it “self-prepared” or use a business label.
⚠️ Beware of tax preparers who base their fee on a percentage of your refund or claim they can obtain larger refunds than competitors. The fee should be based on the complexity of your return, not your refund.
⚠️ Suggests you direct deposit your refund to an outside account

Need a reliable, licensed CPA to handle your taxes?

If you think you’ve been the victim of tax filing fraud, you can file a complaint here. Individuals, sole proprietors, and single-member LLCs can report a tax preparer’s misconduct using Form 14157 and Form 14157-A, which are tax preparer complaint forms.

Reach out to us today and let us safeguard your financial future. Our expertise ensures you stay on the right side of the law and get the most out of your returns. Let’s talk – because your peace of mind is worth it.

Why Switching to Cloud-Based Accounting Makes Good Business

❓ What is Cloud Accounting?

Cloud accounting software is similar to traditional, on-premises accounting software, but it is hosted on remote servers, similar to the SaaS (Software as a Service) business model.

💡 The Old Way

Right now, if you want to manage the financial side of your small business, you probably have to be in your office to do so. You have to be sitting in front of a very specific computer because that’s where you installed your accounting solution in the first place. If you’re at home and need to send an invoice or if you’re out in the field and just collected payment, you have to wait until you get back to the office to reconcile that information.

☁️ Cloud Accounting

With cloud accounting, however, the hardware no longer matters because your accounting software was never installed on it in the first place. It exists on a centralized server that is always connected to the Internet. Because of that, you can access that information from any device with a web connection – be it your laptop while you’re in an airport lounge, your mobile phone while you’re in a client’s office, or your tablet that you keep by your bedside at night. The choice is yours.

But in the end, it’s exactly that – a choice, and one that should not be made lightly. If you really want to know why you should migrate to cloud accounting, or even if you should do so at all, you’ll need to keep a few key things in mind.

❓Why Businesses Should Consider Cloud Accounting

Once you’ve learned as much as you can about what cloud accounting can do, it’s time to move into the realm of figuring out exactly what it can do for you. The question of whether or not this is the right move for you to take is ultimately one that you and you alone can make. By examining the subject from the perspective of both positives and negatives, you’ll be in a better position to make the right decision for your own goals at exactly the right time.

💡 The Advantages of Cloud Accounting for Most Businesses

For starters, the good.

The cloud is a major advantage to businesses that are just starting out, providing the flexibility to manage accounts from anywhere, anytime. All you need is a mobile device, an Internet connection, and the right piece of accounting software. You can manage the entire financial side of your business just as effectively while you’re stuck in traffic as you can behind your desk.

Cloud accounting is also great for collaboration. Multiple users can have access as needed from any location, and they can communicate and work together to stay on the same page in terms of financial activity. The same is true if you’re working with a dedicated accountant. The cloud can give them real-time visibility into your business for a level of insight they just wouldn’t have through other means.

Another major benefit of cloud accounting is that the types of software you’ll be using can typically be easily integrated with other aspects of your infrastructure. In the past, you were likely dealing with silos that hampered productivity. Now, with everything in the cloud, data can be shared freely and information is available in an instant – perfect for breaking down those silos once and for all.

🚩 The Disadvantages of Cloud Accounting

Now, none of this is to say that the cloud has NO disadvantages – far from it.

To begin with, the actual process of moving from your existing system into the cloud will hardly be as simple as flipping a light switch. If you’re staying with software from the same company, that’s one thing. If you’re not, you’ll need to prepare your data so that it can be seamlessly integrated into the new system. This won’t necessarily be the most challenging task you’ll ever face as an entrepreneur, but it certainly won’t happen overnight either.

You also have to think about whether or not you’re comfortable with the fact that you’re giving up a certain level of control over your data to a third party. All of your financial information will no longer be stored on a hard drive in your office – it will be on a server that could be halfway around the country (or the world). If your provider gets hacked, you get hacked. If your provider is disconnected, you’re disconnected. If your third-party vendor isn’t in compliance with any industry-specific regulations that you have to adhere to, guess what – neither are you.

All of these are challenges that can certainly be addressed, but they also represent a significant change from the way you’re probably used to doing things. Again, this is not a decision that anyone else but you can make. Most small business owners in particular will absolutely benefit from the advantages that cloud accounting brings with it… but some won’t.

Don’t look at cloud computing as a solution in search of a problem. You’ll know when it’s time to make the jump by recognizing a number of real problems that you’re facing that cloud accounting represents the perfect solution to.

✅ Best Practices for Migrating to Cloud Accounting

Once you have decided that the time is right to make the jump into the world of cloud accounting, there are a few key steps that you can start taking today to help make the process go as smoothly as possible.

✅ First, shop around.

Not all cloud accounting software is created equally. Make a list of all the things that you can’t do today that you want to be able to do in the cloud or all of the things that you CAN do today but that will hopefully be BETTER in the cloud, and keep that list handy while you search for a new solution. Once you’ve picked the right option, spend some time getting used to it before implementation. Watch online videos, consult with an accounting pro, ask questions, etc. Only once you’re certain that you know how to use your new cloud software properly should you proceed.

✅ Next, prepare your existing data,

the process of which will vary based on the aforementioned factors. If you do happen to be transitioning over to a brand-new piece of software, make a list of all the data that must make the transition so that you can keep things as organized and focused as possible.

Automate some of the process.

When it comes to entering data into your new system, you may be able to automate some, or even all, of the process, depending on the solutions you’re dealing with. This can definitely help speed the process along as much as possible. But a word to the wise – always be sure to back up all of your existing data in a secure, recoverable way BEFORE the process starts. If something goes wrong, if you make a mistake, or if a catastrophe happens, you want to be able to rest easy knowing that nothing has been lost.

✅ Continuous Improvement

Continue to look for opportunities for improvement on an ongoing basis. Once you’ve put a little distance between yourself and your implementation process, ask yourself questions like:

What went well? What didn’t go so well? Why did these things happen?
Which features am I actually using versus the ones that I thought I was going to use but didn’t? Why?
Where am I struggling?
In what ways did I make real, tangible gains in terms of efficiency? How do I push these even farther?
What do I like and dislike overall?

✅ Cloud accounting is not just a trend

The fact of the matter is that cloud computing certainly isn’t going away anytime soon. Forbes estimates that between 60 and 70% of all software, services, and technology will be primarily cloud-based by as soon as 2024.

✅ Begin the process to move your business to cloud accounting on your own terms

There will definitely come a day in the not-too-distant future when you’re going to have to make the jump into cloud computing whether you’re ready to do so or not. It is in your own best interest to begin that process as soon as you’re comfortable, so at the very least you can do so on your own terms.

Need help? 👋

Ready to make the leap to a cloud-based accounting system? We’re here to guide you through every step of the process. Let’s transform your accounting experience together – contact us today to get started!