The mid-year tax review with your CPA is an important tool to help keep your business goals on target, and your business and tax strategies flexible. The review is particularly important this year as major tax law changes loom on the horizon.
The use of tax avoidance strategies, which is as legal as driving the speed limit, has recently hit the IRS radar. Alarms sounded and raised red flags. These alarms, set off by political and special interest groups, herded the alpaca business into center ring with an argument to redefine the alpaca as an exotic pet rather than livestock.
Issues such as this could lead to widespread changes across the board. Mom and pop businesses, specialty and cottage industries, and specifically the alpaca business, get targeted as having possibly overstepped the legality of their business status. Owners worry that they will find themselves red-flagged by every taxing entity from the IRS to city sales tax. This attention is a signal to all business owners that the ground they stand on may not be as stable as it was yesterday.
What specifically happened? Why barnyard livestock to tax shelter exotic pet?
Earlier this month, Sen. Jeff Flake (R-Ariz.) released a report slamming the alpaca industry for using legitimate deductions, such as Section 179, to dodge taxes. This might not have stirred up so much dust if the report had not also brought in comments such as “…speculators realized the creature was not commercially viable livestock.” In summary, Flake included another half dozen business platforms and stated the list was only the tip of the iceberg.
Talk like this grabs the attention of IRS agents as budget cuts push them to select a few good audits with high error potential.
Maintain business stability with your mid-year tax review.
The market shifts of specific products or services, normal personnel changes, or setting up a business exit plan could trigger shifts in your tax and management planning. Mid-year tax reviews also address these more common concerns, and allow business owners to change plans that avoid year-end emergencies. However, business owners also worry about unexpected tax laws that could bite them when least expected.
There’s good reason to worry.
When special interest groups or elected officials open the corral gates and suggest that alpacas be chased out, a whole industry is spotlighted for examination.
It’s no real surprise the IRS looks closely at specialty small businesses, cottage industries, and other businesses which use legal tax loopholes that could be closed with a quick yank. One reason ‘alpaca’ tax loopholes make good targets for closure is public opinion that these businesses are nothing more than cuddly tax shelters. Perhaps some are. But, if tax laws are followed, these business owners are practicing the fine art of tax avoidance, which is legal.
Maintain business flexibility with your mid-year tax review.
In these times of shifting power and opinion, most everyone agrees that tax law changes are on the horizon.
Not building options of flexibility into their tax strategy is a sure way for business owners to find themselves in trouble. Too often, business owners wait until year-end to worry about tax options, and many overlook or severely limit opportunities to reduce their tax liability.
As a business owner, you run your business and do the things that are the passion of your business. As your CPA and tax professional, we take care of the business of your business. Schedule your mid-year tax review now.
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