When it comes to business accounting and tax planning, it pays to work with an experienced professional who knows the ins and outs of business accounting, bookkeeping, and taxes. Fran Schram, owner of Schram & Associates, started her firm part-time in college in 1988. While her passion was child psychology, Schram knew she could make a living with her knack for numbers. She is an enrolled agent and is an accredited business accountant, accredited tax preparer, and accredited tax adviser.
Since those early days, Schram & Associates has grown from a one-woman band to a 20-employee operation with offices in Bellevue and Covington. In Schramâs 36 years in business, the accounting world and tax regulations have changed, and she has seen many businesses come and go. She shared five business accounting tips with us.Â
1. No single information source: There is no single source of information a business can access to help it make informed decisions about bookkeeping, accounting, and taxes. To help fill the knowledge gaps, Schram recommends that every business has an advocate to serve as a resource who can help navigate the complexities and nuances that come with owning a business. Ideally, the resource is an experienced professional, such as a certified public accountant or an enrolled agent.
Sometimes new business owners donât know when to charge sales tax, or they might be confused about payroll taxes. Schram recently had a client who thought it was OK to keep payroll taxes. This lack of knowledge was costly. With an advocate on their side, the business owner figured out what was owed and worked with the advocate to negotiate with the IRS.
2. Understanding tax entities and how they impact ownersâ personal taxes: It is important for owners to know how all the pieces fit together, because there isnât a simple answer. For example, a business owner asked Schram how much he would save on personal taxes as an S corporation if he spent $60,000 on a work truck. The answer: Itâs complicated. There are many factors to consider, and businesses need someone skilled to help them navigate these types of issues.
3. Amending 2020 and 2021 tax returns if an employee retention credit, or ERC, was received: If employers received an ERC for 2020 or 2021, they must amend tax returns for those years. Unlike the Paycheck Protection Program loans that were forgiven, the ERC must reduce payroll expenses for the employer in the year the credit relates to. The issue is very nuanced. Handling this incorrectly is a red flag for the IRS, which could trigger an audit.
âSeek professional help from someone experienced in taxes: a CPA, enrolled agent, or tax attorney,â Schram said. âBusinesses donât want to get this wrong.â
4. Donât skimp on bookkeeping and accounting: Good bookkeeping and accounting services can be expensive, but it is important to hire professionals with the right experience. Sure, a business could save money if a best friendâs cousinâs neighbor does bookkeeping at a discount, but thatâs not a prudent choice. Instead, businesses should ask for referrals from other businesses.
âBookkeeping is your foundation. Donât undervalue the importance of getting your bookkeeping, financials, and taxes done properly,â Schram said.
5. Donât take information from outside sources at face value: While the information might be interesting and useful, it is likely incomplete when not written by an accountant or tax professional. Accounting and tax are highly complex fields, and each business has unique circumstances that require education and experience from an accounting or tax professional to handle properly.
