The tax filing season is finished and you don’t have to worry about your business taxes for another year, right? But how do you know if you have paid the right amount of taxes or paid all the taxes you owe?  Some undiscovered tax problems are found by the government’s computer systems which result in a dreaded tax notice in the mail, claiming you owe taxes, penalties, and interest.  Additional tax preparation errors are caught by audits and reviews conducted by the government agents or auditors. But what about the ones not found?

Maybe an even better question is: how do you know you haven’t paid too much in taxes? I am sure most business owners have felt that way from time to time, especially when making estimated tax payments, but haven’t really explored the possibility any further than preparing last year’s returns.

All accountants aren’t created equal. We all don’t read the same articles, attend the same training, or are exposed to the same client research. This means we all bring a different perspective to the client work we perform. Just this past tax season, I reviewed more than a dozen tax returns for prospective clients and on almost every one of those returns I discovered ways to help them. A couple of these reviews did result in additional taxes being owed and essentially saved the taxpayer additional penalties and interest by filing amended returns. Finding corrections to returns avoids repeating the error or omission year after year which can become a very big tax problem if caught two or three years later.

On more than half of the returns I reviewed for prospective clients this year, I discovered errors or omissions that resulted in sizable tax refunds. The tax refund totals for these returns ranged between a couple thousand dollars to several hundred thousand dollars. The smallest refund total resulted from some simple errors. The largest refund resulted from not taking advantage of various deductions and credits available to businesses and their owners on past returns.

So how exactly did we get one business and its owner refunds totaling more than $250,000, including interest (yes that is correct, the government pays you interest when they owe you a refund from a previously filed return)? The refunds were based on unclaimed deductions, unclaimed tax credits, and the way the business income was reported.

In our initial review of the business return, we found an unclaimed deduction related to their industry which amounted to a $60,000 deduction. In addition, we found tax credits related to its employee wages and benefits. The government has incentives built into the tax code to promote various areas of the economy or promote certain government initiatives; many of these incentives are available to small and medium-sized businesses. These incentives take the form of either deductions or tax credits. We matched up these incentives and benefits with the specific business activity. Many incentives come from capital purchases a business makes or from certain types of expenditures. Once we understood the business and type of revenue and expenses they had, we were able to find additional deductions and tax credits. The changes made to the business returns from our initial review is where a majority of the tax savings were found.

Quite often business tax planning and consulting can lead to immediate and great future tax savings. After reviewing the business structure, salaries, and benefits being paid to the owner and its employees, we found additional tax refunds for the business and the owner. The business and owner are now positioned to take advantage of additional benefits in years to come, with the potential of saving even more taxes in the future.

Many tax professionals can prepare basic tax returns. A few of these professionals are also business advisors that can give advice on how you and your business can benefit from additional deductions and credits that lower taxes and provide more profits. Finding a trusted advisor that has the experience and resources to provide business tax planning and consulting services can make a tremendous difference to your bottom line. If any of the questions I mentioned at the beginning sound familiar to you, perhaps it’s time to for a tax checkup with that second pair of eyes.

Donald P. Hanck, CPA, ABV, CFF is a principal with Barnes Wendling CPAs LLC and has over thirty years of professional experience serving local businesses, not-for-profit organizations, and individuals by providing a full range of accounting, tax, and management advisory services. Don is providing client relation services in the Sandusky, Ohio office and can be reached by phone at 419-626-3627 or by email at dph@barneswendling.com for your tax check-up today.