Interview with H.A. Beasley – Part Four

This is part four of our interview with H. A. Beasley, founder and director of H.A. Beasley & Company, PC, an accounting firm in Murfreesboro, Tennessee and ICS Law Group, PC.

Click on the following links to read: Part 1, Part 2 and Part 3

Question: I’m sure your meetings with business owner clients help maximize your chances to file a client’s tax return on time.

H.A. Beasley: Yes. For many clients, one of the simplest ways to help a timely filing of a business tax return is to hire someone to just be responsible for the bookkeeping and hold them responsible for it.

If you hire someone to come in and do your books, and they make a mistake and it’s all on you. But if you hire a professional firm to help you with bookkeeping, payroll tax compliance, sales tax compliance, and all of the various state and federal regulations—they’re responsible.

If our firm makes a mistake on behalf of a client, it is up to us to fix it. Since the accounting firm takes the burden off of the business owner, the owner is free to run the business.

In addition to taking care of the tax forms, we get our business owner clients regular financial statements. We help make sure bank accounts are all balanced, that there’s a list of who owes money to the business and how much. So not only is the business owner’s time freed up, he or she gets the financial tools needed to help effectively run the business.

Question: In your experience with a lot of business owners, do they try to use a program like QuickBooks and does that help in the process?

H.A.: QuickBooks is like a real fine automatic weapon that really will hit what you point it at. It is definitely one of the best financial management tools that have ever been created for business owners. There are other tools on the market that are similar, but QuickBooks is the standard.

While QuickBooks is a great tool, when it is improperly used, it can also cause financial heartache for the business. For example, it has the ability to download transactions from your internet banking or your internet credit site and really populate a database with a lot of entries, whether right or wrong.

Many of our clients use QuickBooks. When they do, we encourage them to allow us to do a monthly rigorous review of the entries. One simple way for us to check that QuickBooks is being used properly is to just print out a copy of the company’s QuickBooks balance sheet. We’ll review it with the business owner to make sure it looks right to them.

Question: H.A., I really appreciate you coming on the program today and I expect that we will invite you back because I know that there are lots of other topics related to taxes but in the meantime if a listener wants to learn more about you or get in touch with you, how can they do that?

H.A.: Go to HAbeasley.com and click on “Contact Us” on the left side. You’ll be able to see our telephone number, address, and you can also submit an email inquiry from our website.

Interview with H.A. Beasley – Part Two

This is part two of an interview with H. A. Beasley, founder and director of H.A. Beasley & Company, PC, an accounting firm in Murfreesboro, Tennessee and ICS Law Group, PC. To listen to the the interview, visit this YouTube link .

Question: So, is it fair to say that the biggest problem that a business owner faces with filing their taxes on time is due to their lack of focus? Is that the most common problem?

H.A. Beasley: I think any aspect of compliance with the government is an issue for a first time business owner or a small business operator whether it is taxes or some other aspect of regulation. Most entrepreneurs are good at the business part of what they do. They don’t know where to start when it comes to addressing the necessary aspects of filing with tax laws.

Question: So if they don’t comply or if they are late, what are some of the consequences that occur?

H.A.: Well you know that is one of the interesting things; there are a lot of popular misconceptions about income tax compliance. Just talking for a minute solely about federal taxes, the late filing aspect of non-compliance is more expensive that late payment today.

For example let’s say I owe $50,000 worth of taxes because I have had a great year of business. Say that April 15^th rolls around and I don’t file my federal tax extension paperwork or my federal return. I don’t send any money, I don’t do anything. The most expensive aspect of that is the fact that I didn’t file an extension for a return. The IRS will begin immediately assessing 5% a month up to 25% in 5 months, from that $50,000 of tax that I owe, and that will become $62,500, just because I didn’t send in some paperwork.

Meanwhile the penalty for not paying taxes is dramatically less than that. It is a lot like working with a finance company, for the interest of penalties for not paying.

If we can help our clients to get used to the idea that they have got to file the paperwork, and if they can’t pay it immediately it is like dealing with any other creditor. We have got to be good with our paperwork and do what the creditor requires so that we can either get a payment plan or demonstrate that we aren’t presently able to pay.

We’ve found the IRS is very willing and able to work with people that are very good at communicating with them. The biggest penalty, to summarize, is they get people for not doing the paperwork. It may take a business to get on his feet; once he gets behind on his taxes it may take 2 or 3 years to pay those taxes. It would be relatively inexpensive to be late on payment so long as he has not failed to file all the required filing within the extended few days.

Question: How does the extension process work with the IRS?

H.A.: IRS Extensions are “automatic.” Individual taxpayers are entitled to get one automatic extension that is good until October 15^th. My understanding is that technically the IRS can challenge an extension with a tax is not fully paid but in my practice, I’ve never had them do that, that I can recall. So, an extension with the IRS does not require payment to be valid.

So in my prior example of the guy who owed $50,000, if he’s our client we’re going to send the extension off on April 14^th whether we know how much he owes or not. We’re going to get that extension ready and send it registered or certified or otherwise well known to the IRS that he’s filed his extension on time. That gives him the initial six months not only to determine how much tax he owes if he doesn’t know. But if the IRS doesn’t know how much he owes, they really can’t begin the collections process.

Filing an extension is also important because oftentimes for business owners that have had a great year and he would like to contribute to, lets say, a SEP IRA plan or some retirement program like that. SEP’s are one of the plans where, so long as you have filed valid extensions, you can make a contribution later…so…You can actually do after a year end tax planning with proper use of the extension.

Let me add that for Tennessee residents, Tennessee is a little more narrow-minded when it comes to the extension process. We’ve found that in order to get an approved extension you’ve got to pay the appropriate payment along with the extension. That puts a great deal more pressure on taxpayers, especially business owners.

Stay tuned for next Thursday as we share Part Three of the interview with H.A. Beasley.

Interview with H.A. Beasley

This is part one of an interview with H. A. Beasley, founder and director of H.A. Beasley & Company, PC, an accounting firm in Murfreesboro, Tennessee and ICS Law Group, PC. To listen to the first part of the interview, visit this YouTube link .

Question: Let me start by asking you why people have such a hard time filing their taxes on time?

H.A. Beasley: There’s no doubt that there are many reasons, but one that I think is common and avoidable is that business owners don’t have the right method of tracking tax deductions and otherwise keeping their business books.

We work for a lot of small business owners who don’t have an experienced bookkeeper on staff. Most of our clients who have hired an accountant or bookkeeper are so involved in other aspects of the business that they aren’t really in a position to know whether the records are complete and adequate. Tax time is when they usually finally discover that their records aren’t up to speed. At that time they struggle with how to solve that problem on time once they’ve discovered it.

I think another related reason is, tax time comes around and business owners do get help from outside professionals and the experience doesn’t go all that well. Many business owners have had bad experiences in trying to get outside help.

Sometimes the combination of difficulty in keeping records and having to work with an outside professional puts a business owner in a spin. Sometimes they don’t file needed tax returns for years. It’s common for us to new business owner clients come in to our office two, three, four or sometimes five years because of the bad experiences that started them down the road of not getting them filed.

Question: Five years of unfiled returns?

H.A.: It’s not uncommon. We’ve worked with entrepreneurs who had a bad experience with an inside person that they thought was keeping the records—and wasn’t. We’ve also worked with owners whose businesses just took off so much that they were unable to get tax and financial work done in the office.

Whatever the reason is, it’s just not that uncommon. I am talking about very small businesses that don’t have a large staff that keeps things going for them. They don’t really have the time and intonation to supervise that staff.

Question: Would it be fair to say based on what you just said that it is the smaller businesses that are the biggest procrastinators when it comes to taxes?

H.A.: I think so. We are here in here in Middle Tennessee where so many effective business people are running their businesses out of a vehicle while using a cell phone, they don’t know where to start when it comes to gathering records as they go through their business year. They often will hire a person who says they can come in and sit down in the office and take care of it for them. But they are not really well equipped to evaluate how well the job has been done until the end of the year comes and they sit down and do taxes. And if things are missing it is very hard to gather those things after the fact.

Stay tuned for next Thursday as we share Part Two of the interview with H.A. Beasley.