Understanding Tax Accounting and the Importance of Year-Round Maintenance

Understanding Tax Accounting

Every business needs an accounting department to log and maintain accurate records of purchases, inventory, sales, shipping, and attendant expenses. Accounting allows you not only to track growth and keep expenses in check—it allows you to evaluate the status of your business from multiple viewpoints at any moment. Often called “the language of business,” accounting not only tracks profit and loss, it guides planning strategy and helps businesses like yours be responsive to market forces.

Tax accounting is of particular importance, given the rapidly changing landscape of IRS rules and regulations. Falling out of compliance with such regulations, even if by unconscious oversight, can land you and your business in hot water with the IRS. An experienced team of tax accountants can ensure that your business remains in full compliance, while also alerting you to potentially costly pitfalls such as fees and penalties for noncompliance.

Why Tax Accounting is Important

Not all accountants possess the same skill set. Accounting is a diverse field that embraces individual finances, business (profit/loss) accounting, and accounting for nonprofit organizations. Each requires specific expertise. For example, an accountant for a nonprofit will likely have to track donations and grants, log expenditures for specific projects, and ensure that grant money is being spent according to specified contracts. This may involve an array of ledgers and documents. An accountant in a for-profit entity, on the other hand, may be more concerned with tracking profits and losses, general company expenses, potential write-offs, etc.

Tax accounting also has its own landscape of rules, forms, and interactions. An experienced team of tax accountants can help your business:

  • Understand what is (and is not) taxable income
  • Meet all filing deadlines
  • Remain compliant with IRS rules and regulations
  • Anticipate how IRS rule changes will affect your bottom line
  • Maintain compliance with state and local tax laws
  • Save money by avoiding penalties and interest payments

What Makes Tax Accounting Different

Generally accepted accounting practices (GAAP) focus primarily on tracking assets as well as annual profits and losses. Tax accounting is different, and it is utilized for the preparations of tax returns and tax payments.

Tax accounting is used by individuals, businesses, corporations and other entities.

Tax accountants are necessary, even to those who are exempt from paying tax.

Tax accounting for an individual focuses on income, qualifying deductions, donations, and any investment gains or losses; whereas for a business, tax accounting is more complex, placing increased scrutiny on the ways in which funds are spent.

Although “bookkeeper” and “accountant” are often used interchangeably, bookkeepers and accountants have different job requirements. Accountants, for example, traditionally acquire CPA certification and a master’s degree, while bookkeepers do not. Perhaps the easiest way to describe the relationship between the two professions is that bookkeepers align the small pieces of a company’s financial records, whereas accountants view and arrange those pieces.

In today’s financial environment, most accountants hold bachelor’s degrees, and many hold advanced degrees, such as MBAs with accounting or finance concentrations or a master’s degree in accounting.

Tax Accounting Services

Unless your company has an established in-house tax accounting department, you may want to consider outsourcing your tax accounting services. Seeking the aid of a qualified tax accountant trained in tax preparation, IRS rules, and regulations can go a long way toward ensuring that your business remains in full compliance with IRS rules.

More than just a bookkeeper, a tax accountant brings specific experience and knowledge to the task. Confused by the vast array of tax forms? Having trouble understanding the latest round of IRS rule changes? A professional tax accountant can help transform confusion into clarity, and can advise you of money-saving opportunities that help you get the most from your tax return, without running afoul of the law.

A seasoned accountant, for example, can provide a monthly snapshot of your business’s finances, so you’ll always know where you stand and how best to prepare for the future.

Year-Round Tax Planning

At Moskowitz LLP, we believe in a year-round approach to tax planning, so our clients never miss a deadline or an opportunity to save money. Each month, we address a different phase of your accounting process:

  • Annual Operating Plan (January)
  • Year-End Close (Feb)
  • Taxes & Compliance (March)
  • Staffing KPIs (April)
  • Strategic Business Review (May)
  • Updating the Annual Operating Plan (June)
  • Staffing KPIs (July)
  • Goal Deployment Planning (August)
  • Long-Range Plan (September)
  • Resource, Liquidity, & Capital Planning (October)
  • Tax Planning (November)
  • Internal Controls Review (December)

Our experienced team of tax accountants and attorneys are committed to providing you and your company with top quality accounting services that maintain IRS compliance and help you make the most of your return. Why risk hassles, fees, and penalties. Discover the Moskowitz difference. Contact us today!