Do You Know How Much Your Tax Obligation Will Be for 2012?

Do you know what your tax position will be when you file your tax return in April of 2013?  If you can’t answer that question with a $ sign in front of it, you need to get your tax accountant on the phone.  One expectation I have of a business tax CPA is that they are proactive in planning a business and personal tax position – if they are not, you need to rethink the overall relationship.

In order for your CPA to calculate your estimated tax position, they will need your most recent financial statements and your personal financial statement (if not a C Corp structure).  You will also need to provide a projection through the end of the year.  This doesn’t have to be fancy, but should take the form of your financial statements.  You need to highlight your assumptions and specific investments in capital.  With this information, your tax accountant will be able to give you a reasonably solid estimate of your tax position for when you file your return.

Once you have the tax position, you can now plan what you will do the rest of the year to either mitigate the situation or accumulate resources to take care of the obligation.  You may be surprised to hear that you shouldn’t immediately find ways to mitigate a negative tax position.  However, if you do not have the means – cash flow – to afford tax mitigation actions, you should not spend money solely to avoid tax.  If you can afford it, follow the advice of a CFO and good tax accountant – there are more ways than just buying more capital assets.

Going forward into 2013, I suggest having a solid understanding of your tax position by August 1.  This will give you sufficient time to enact actions to countermeasure deficiencies. Work closely with your CFO to drive your maximum profitability and cash flow and keep your tax accountant in the loop to identify any tax advantages – the tax laws change often.

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