Advanced Underwriting Consultants

Interview with H.A. Beasley – Part Three

AUC:This is part three 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.

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

Question: Let’s shift focus back to the IRS for a second. Is there something that a taxpayer can do to minimize the chances of an IRS audit?

H.A. Beasley: Our clients and friends seem to think that filing after April 15th increases the chance that they will be audited. If you file proper extensions, I’m completely convinced that it does not increase your chance of an audit. In fact, there are those out there that are publishing tax advice that say that the contrary is true, that when you file an extension you might actually reduce the chance of an IRS audit.

We believe we can help clients minimize the risk of an audit first of all by choosing the best form of business entity depending on the type of business.  There tends to be market differences in the way the IRS choose to audit for different kinds of businesses.

So whether a person operates as a sole proprietor, on one hand, or perhaps they incorporate or form an LLC on the other hand, can tend to reduce the chance of an audit.

They need to properly file all of the required information returns such as IRS Forms 1099 and W-2.  And they need to have someone that knows review their tax files to make sure they don’t look wrong. Sometimes just the way the information was put on the forms can raise a flag.

Question: What can a CPA firm like yours do to help business owners make sure their taxes are right?

HA: One of the first things we find beneficial is to make sure that all of the local, state and federal taxes requirements are being acknowledged and acted on.   Certain special forms may be required for those in the trucking business, for example, and the forms might be different for a food, service or retail business.

Another way we work with small business owners is that we arrange to have at least one other tax meeting in a year—not at tax time–to help the taxpayer.

During the tax preparation process in the spring, we also try to meet with each client, if they want to, and do our first shot at the tax plan for the year while we are doing last years return. We’ll identify, for example, whether estimated taxes need to be paid or will there be a more effective way to deal with tax liability.

After that first plan is put in place in the spring, or when we do the taxes, sometime before Christmas, probably around Thanksgiving, we’ll have the second meeting. Without a good spring meeting and follow-up late fall meeting, it’s very easy to pay too much tax unnecessarily just by not making the best decisions by the end of the tax year.

Because the clients have some choices with regard to how business cash flow and taxes are managed, some of our larger clients may meet with us three, four times or more a year. But for the vast majority, for hundreds of our clients, the twice a year cycle works out pretty well. There may be an occasional phone call when they are making a business decision that has a potential of tax consequences, just a quick call to determine the best way to handle that business transaction.

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.