Effective Tax Planning for Small Businesses: Expert Advice from Jim Liggett, CPA

Jim Liggett, a seasoned certified public accountant with three decades of experience, offers essential advice on effective tax planning for small businesses. As a partner at Liggett & Webb P.A. and a co-founder of MLZ Partners LLP and Outsource Partners International, Liggett has extensive expertise in tax preparation, planning, and compliance. Here, he shares key strategies to help small businesses optimize their tax outcomes and ensure compliance with tax laws.

Why are Audits Important?

 

The Meaning and Definition of Auditing

'Audit' is derived from the Latin word 'audire,' which means 'to hear.' In early days, one had to listen to an accountant read over the accounts for verification. He was known as the auditor.

The purpose of an audit is to determine the reliability and validity of the information. Detecting and preventing future errors/frauds by examining books of accounts, vouchers, and documents is the main function of auditing. It protects the company's financial interests. In developed countries like the USA, expatriate taxation can be a tricky matter. In this article, Certified Public Accountant Jim Liggett CPA, will take a look at the importance of an audit system to a company.

 

Functions of Performed by a Public Accountant

The functions performed by public accountants are very important, since their main objective is to comply with the fiscal regulations established by the state in which they operate as well as to facilitate decision-making by the managerial levels of the company or organization.

Here, experienced certified public accountant Jim Liggett CPA will share the main tasks performed by a CPA.

 

What Are Tax Audits?

A tax audit is a review of your tax return by the IRS to verify that you correctly reported your income and deductions.

The IRS (Internal Revenue Service) can decide to make a tax audit to examine your tax return a little more closely and verify that you reported your income and claimed your deductions correctly.

“Generally, your tax return is chosen for audit when something on your return is out of the ordinary,” says experienced certified pubic accountant, Jim Liggett CPA.


The IRS has three main types of audits: the mail audit, the office audit, and the field audit.

Here, Liggett CPA will explain more in depth these types.

Audit by mail 

If the IRS decides to conduct any type of audit, you will always receive a mail notification. The simplest type of IRS review is the audit by mail and does not require you to meet with an auditor in person.

Liggett CPA indicates that generaly, an additional documentation can be requested by the IRS to verify several of the items you included on your tax return.

Office audit

According to Liggett CPA, in the case of an office audit, you are required to go to a local IRS office.

Usually, these audits include questioning by an audit officer about the information in your return.

Liggett CPA also specifies that you can be asked to bring specific information to an audit office. This information may include books and records for your business, your bank statements, and personal receipts.

The professional who is specialized in providing tax, audit and accounting services to companies indicates that you have the right to bring an accountant or attorney to represent you at these meetings.

Field audit

The field audit is the most comprehensive review that the IRS conducts. The audit will be conducted at your home or workplace by an IRS agent. Field audit are generally conducted when more than one deduction or two are being examined by the IRS.

This very comprehensive audit usually will cover many, if not all, of the items on your tax return.

The possible results of an audit

Jim Liggett CPA shares that there are three possible results of an IRS audit:

The IRS is satisfied with the explanations and the documentation you have provided and will not require from you to change anything on your tax return.

The IRS proposes changes to your tax return. You can accept the changes and sign a review report or other form provided by the IRS and establish some type of payment agreement.

The IRS proposes changes to your tax return and you do not accept the changes. Then, you can request a meeting with an IRS administrator to further examine your case, or you can request a formal appeals meeting.

Inheritances in the United States

For inheritances in the United States, the laws of each state establish who owns the assets of a person after their death. Or, to me more precise, who acquires the ownership of the real estate, money, rights and debts of the deceased, and in what percentage.

However, there are legal aspects that apply to the entire country and principles that must be known, such as the types of will, the rights of the spouses and children, succession rules and applicable taxes.

Corporate Tax Planning

 

Tax planning is the development of strategies to minimize or defer the tax burden of a society. A company may have to face more or less taxes and in different periods of time depending on various circumstances. Tax planning analyzes them and designs the most favorable map for it. Tax spending is minimized and / or postponed as much as the law allows and as much as the company agrees.

With proper tax planning and through identifying appropriate opportunities for tax savings, the tax a business bears can be optimized. In this article, Jim Liggett CPA, an accounting professional and partner at Liggett & Webb P.A., explains how tax planning and compliance can help you manage your tax affairs efficiently and finding legitimate tax savings opportunities.

What is Tax Planning?

One of the main tasks of a tax consultancy is the tax planning of its clients. This is nothing more than the development and analysis of strategies to delay or minimize the tax burden of a company. In various contexts, always within the law, companies can face lower taxes or defer them over time if planned correctly. However, it is a much more complex tool than it may seem.

Two businesses engaged in the same activity and with similar characteristics can pay taxes very differently. This is usually because one of the companies has correctly planned its taxation. One of them has made decisions that have made face lower taxes or delay them over time. The other has not, but both continue to comply with the law in exactly the same way. How is this possible?

Certain types of companies have tax benefits, we can try to avoid double taxation, choose a legal form that benefits us in the future, defer the payment of taxes to increase liquidity, etc.

Now, it is important to know what tax planning is, but just as important is to know what it is not. Tax planning is not tax evasion or tax fraud. According to Jim Liggett CPA, the key thing is to analyze the variables to detect the best formula to minimize expenses by acting within the law. In the end, it consists of taking into account what will be the tax burden that a company will have to face, and what will be the best moment to do so.

As a Certified Public Accountant with extensive experience in the preparation of financial statements, taxation, and special engagements in preparing business valuations, Jim Liggett CPA has the breadth of knowledge and depth of experience to assist companies.