Why Your Accountant Isn’t Saving You Money (And What Tax Planning Actually Looks Like)

All right, today we're talking about what you should actually expect when you get an accountant on board and you are really starting to build your business.

Oftentimes when we're building a business and it's really starting to take off, we're just using the tax advisor or the accountant that came with us when we first started building, whether we were a W-2 previously or whatever, they're just kind of... grandfathered in, right? But now that the business is doing really, really well, we need to really think about what that accountant is doing for you and how they're doing it.

So oftentimes when I start working with clients in this situation, they may say, you know, my accountant doesn't really help me all that much.

I just kind of hear from them around tax time.

I give them the stuff and they let me know how much I owe.

And that's all well and good when you were a W-2 That does not work once you are really starting to build a viable business, particularly one that is profiting, you know, hundreds of thousands to million dollars a year.

And the reason that that doesn't work is because most CPAs are just hired to accurately file your tax return come April or if you're on extension October.

And that's really it.

They're not they're just looking backwards.

I liken that to sort of you're in a car.

And they are only looking out the back window, but you need to have someone looking out the front window.

And that's because you need to be able to plan and guide that vehicle, i.e. your tax position throughout the course of the year.

And just looking back at the end of the years, there's only so much you can do at that point to really benefit from the fact that your business is thriving.

And so it may already be too late if you're looking at it in February or March.

And so that really kind of bleeds into what is the actual difference between tax planning and tax filing.

Tax filing is really a compliance function.

You know, you have the set amount of things that have been done over the course of the year.

They are sitting there filing paperwork to ensure that the government knows what's going on and is aware and you two agree on how much is owed.

That's done in April or depending on if you're on extension, maybe later.

But there is so much that can be done throughout the course of the year if things are met with a timely situation that can reduce that tax bill come tax time, whether it's changing the structure of the business, changing how you're taxed, changing when you're taxed, putting other tools in place to ensure certain money isn't taxed.

All of these things can be put in place.

But if you've already about to sign the tax return, it's too late.

The CPA is not going to be going there other than saying, hey, maybe you should open a SEP IRA.

The SEP IRA could get you in a lot of trouble if you have certain amount of employees or employees that have been there a certain amount of time.

And so that may or may not even be the right solution.