The Top Five Year-End Questions to Ask Your CPA

By Dr. Aaron Mahl, EVP Business Development, iTValuations

As the year draws to a close, many business owners are turning their attention to tax strategies, compliance, and financial planning for the upcoming year. In our recent webinar, The Top Five Year-End Questions to Ask Your CPA, I was joined by Greg Northrop, Director of Tax and Finance at ITValuations and Managing Partner of IT Tax Advisors. Together, we explored five critical questions every business owner should address with their CPA before year-end.

1. What is my projected federal and state tax liability?

Understanding your projected tax liability is crucial for proactive planning. As Greg noted, “Tax compliance is retroactive, but proactive planning allows flexibility.” Estimating liabilities early lets you allocate funds efficiently, avoid surprises, and determine if additional tax payments are needed to meet safe harbor requirements.

Greg emphasized considering both federal and state obligations, including nexus exposure—ensuring businesses meet filing requirements in states where they have physical or economic presence. Failure to address these obligations can result in penalties or challenges during due diligence processes.

2. Do I qualify to pay pass-through entity (PTE) tax?

PTE tax can offer significant benefits for business owners. This workaround to the federal $10,000 state tax deduction cap allows businesses to deduct state taxes at the entity level, bypassing the cap. “If your state tax liability exceeds $10,000, this is a valuable opportunity,” Greg explained. However, eligibility depends on your business structure, and payments must be made by year-end to be deductible for the current tax year.

3. What is the status of beneficial ownership information (BOI) reporting?

The Corporate Transparency Act’s BOI reporting requirements have been a topic of concern for many business owners. While initially set to take effect in 2024, a recent federal ruling has temporarily suspended these requirements. Greg’s advice: “If you’re concerned about future changes, you can voluntarily file now to avoid uncertainty.”

4. What strategies exist to reduce my tax liability?

Greg shared several actionable strategies:

• Bunched Charitable Giving: Consolidate multiple years of donations into a single year using a donor-advised fund to maximize deductions.
• Accelerated Equipment Purchases: Leverage Section 179 and bonus depreciation for eligible purchases.
• Accrual vs. Cash Basis Analysis: Consider a method change to align tax reporting with your business’s financial structure, particularly if you’re planning a sale.

Each strategy requires tailored planning to fit your specific financial and tax situation.

5. Are there any tax law changes I should be aware of?

Although 2024 didn’t bring significant tax law changes, the 2017 Tax Cuts and Jobs Act’s provisions are set to sunset at the end of 2025. Greg highlighted potential future adjustments, emphasizing the importance of staying informed and engaging with your CPA to prepare for potential impacts.

Preparing for Year-End

Year-end tax planning is not just about compliance; it’s about strategic preparation for the future. Whether it’s addressing state tax exposure, leveraging PTE tax opportunities, or planning for potential legislative changes, now is the time to act.

At ITValuations and IT Tax Advisors, we’re committed to helping business owners navigate these complexities. If you missed the webinar or want to explore these topics further, visit our website for a recording and additional resources.

Wishing you a successful close to 2024 and a prosperous year ahead! Click here to continue the conversation.