Alexandra Levits Water Cooler Wisdom Tax Hacks for Business Owners

Alexandra Levit's Water Cooler Wisdom Tax Hacks for Business Owners Ill never forget the first time I had to file taxes as a small-business owner. Between the myriad of IRS forms, deductions, payrolland quarterly installments, I was overwhelmed. I quickly learned that the best plan of action was to concentrate on how to file taxes throughout the year, rather than waiting until the precious few days before the early spring deadline. This month, I spoke to three small-business owners who know a thing or two about how to file taxes. Along with her partner Beth Doane, Kelly Gibbons runs the communications firm Main Rosein Los Angeles; Nick Pirollois the co-founder of Philadelphia-based scholarship website Scholly; and Vincenzo Villamena is the owner of tax consultancy Online Taxmanin New York City. Some business owners view taxes as one of the least fun aspects of running a business. Why is itimportant to know how to file taxes? KellyGibbons: Taxes are definitely an aspect of business ownership on which most people have a horrible perspective. We made a conscious decision to look at taxes as something positive. Filing taxes is a reminder of all the great things we take for granted living in a first-world country with countless opportunities. We want to pay our fair share and the focus should be on just thatâ€"paying the amount we should be and honoring why taxes are not a bad thing. It behooves owners to know tax law, to hire expertsand to make smart decisions that benefit us now and for the longterm. Nick Pirollo: Taxes are logistically challengingand giving away money always hits home. Its for those reasons, however, that doing your taxes properly is an important business focus. Ive seen a good number of businesses retain a lot more income by adopting better tax habits. The secondary benefits of proper planning are countless, including being better prepared for audits, seeing issues in your expensesand minimizing inconsistencies in your books. Vincenzo Villamena: Tax planning is important because it represents an immediate and definitive short-term return of investment in accountant fees. Business owners can make decisions based on real analysis on the tax rates and associated scenarios. What isyour tax preparation process like? Pirollo: My preparation officially begins in December, but because I dont manage my year-end filing in-house, it is important to manage the relationship with my accountant year round and make sure they are clued in before tax season rolls around. In December, I round out my books, gather any necessary paperworkand make projections for the remainder of the month in order to form a full picture of the businessyear. This means I am only making slight adjustments once Decembers final numbers come in. It also makes the coming year much more manageable, giving me ample time to get any extra cash in place to cover costs. Villamena: We generally sit down with each client and look through their previous filed returns, examining improvement areasâ€"for example, investment in capex before year-end, retirement plans, making an S-Corp electionor declaring year-end bonuses. Gibbons: We prepare well in advance with respect to our cash flow, and set aside more than we think we will need in order to compensate for higher earnings than what we may expect. This is crucial with a client-based business like ours. For the rest of the interview, check out the AMEX Open Forum.