Key conversations to have with your CPA

ARTICLE | October 21, 2024

When you schedule a meeting with a CPA, you’re already making a smart move toward better financial management. But to get the most value for your time, it helps to come prepared. By addressing key topics, you’ll be better positioned to make informed financial decisions.

This isn’t an exhaustive list of questions but a starting point to help you think about the essential areas you don’t want to overlook. Whether you’re optimizing personal finances or managing a business, these conversations can set you on the right path and ensure you’re getting the most out of your meeting.

Personal finances

Tax planning and optimization

Questions to ask:

• What tax deductions or credits could I be taking advantage of, and what do I need to keep track of?

• How can I lower my tax liability throughout the year?

• Are there any changes in tax laws that could impact me?

• Am I making the most tax-efficient investments?

• Should I pay off debt or build up my savings and investment portfolio?

• What can I do now to afford a larger home purchase down the road?

Everyone wants to pay the least amount of taxes legally possible, and that requires proactive effort throughout the year. Many people miss out on credits and deductions they’re eligible for, so be sure to ask your CPA about any tax savings that could apply to your circumstances.

Also, tax laws expire and change, and those changes can affect you in ways you might not expect. Ask your CPA about any recent updates and whether they could impact your tax strategy.

Finally, consider asking about tax-efficient investments because certain options may help grow your wealth while reducing your tax burden.

Major life events

Questions to ask:

• How will this event affect my tax situation?

• Are there any tax benefits that apply to my new situation?

• How can I adjust my financial plan to reflect this change?

• Should I be updating my estate plan or financial strategy?

Major life events like buying a home, getting married, or having children can bring new financial opportunities and challenges. For instance, getting married could change your tax situation and affect the deductions and credits you’re eligible for while buying a home might qualify you for additional deductions. These aren’t things you want to overlook, so make sure your CPA is kept in the loop.

Likewise, you’ll want to revisit your estate plan during these milestones. Many people mistakenly ignore or delay estate planning, but it’s crucial to ensure that your loved ones are cared for if something happens to you. Major life events not only affect your immediate financial situation but also your long-term strategy, so be sure to discuss these changes with your CPA. They can help ensure your estate plan is up-to-date, preserves your wealth, and minimizes taxes in the long run.

Retirement planning

Questions to ask:

• Which retirement accounts make the most sense for me – IRA, 401(k), or others?

• Am I saving enough for retirement?

• What strategies can I use to minimize taxes on my retirement savings?

• Should I be maxing out my retirement accounts to reduce taxable income?

• How should my retirement plan adjust as my goals or financial situation change?

Planning for retirement goes beyond just opening a retirement account. It’s about ensuring you’re saving enough to meet your future goals and doing so in the most tax-efficient way possible. One strategy is maxing out your retirement accounts to reduce taxable income and boost your savings. However, once that money is in a retirement account it can be difficult to access without penalties, so speak to your CPA about how much you can reasonably contribute without compromising your liquidity.

Don’t wait until you’re close to retirement to start thinking about these things. Retirement planning is a long-term effort, and strategies can and should change over time based on your goals, income, and tax situation. Regular check-ins with your CPA will help you stay on track and make any necessary adjustments as life progresses.

Business finances

Financial planning and projections

Questions to ask:

• Can you help me forecast my business’s cash flow for the next year?

• When investing in equipment, how do I know whether to finance it or pay cash?

• What financial reports should I be looking at regularly?

• How can I improve profitability and cash flow?

• How can I leverage the debt on my balance sheet to support business growth?

As a business owner, you need to know where your money is going and how to plan for the future. While you likely know the importance of budgeting and forecasting, your CPA can help you dig deeper, ensuring you’re focusing on the right financial data to make informed decisions.

Be sure to ask about strategies to improve profitability and cash flow, as well as how to leverage existing debt to enhance your financial position. Your CPA can offer insights that ensure you’re making the right moves to get where you want to go.

Tax strategies for business

Questions to ask:

• Is my current business structure still the best option for minimizing taxes?

• How can I reduce my tax liability over the next year?

• Am I taking advantage of all the tax credits and deductions my business could be using?

• Based on my financial reports, is there any opportunity to make tax-efficient investments?

If you haven’t talked to your CPA about your business structure – whether you’re set up as an LLC, S-Corp, or something else – you’re missing a huge piece of the puzzle. The way your business is structured has a significant impact on your taxes, so it’s important to regularly evaluate if your current setup is still the most tax-efficient.

Also, your tax strategies may differ depending on the type of entity you have. For instance, if you operate as an S-Corp, your CPA can help you determine the right balance between taking income as compensation versus pass-through distributions to minimize taxes while staying compliant with IRS guidelines.

Beyond business structure, you should regularly review your financial reports with your CPA to spot any opportunities to optimize your tax situation with credits and deductions. Your CPA may spot some credits or deductions you’ve missed or suggest tax-advantaged investments, such as asset purchases that could benefit from Section 179 or bonus depreciation.

Employee compensation and benefits

Questions to ask:

• What’s the best way to structure compensation to attract and retain the best employees?

• Are there tax incentives available for providing certain benefits?

• Is it financially feasible for my business to offer more benefits or increase compensation?

• Should I offer a raise to high-performing employees or provide a bonus instead?

Taking care of your team can pay off in more ways than one, but compensation packages must be carefully crafted to balance employee satisfaction with cost management. Review your existing compensation plan with your CPA to ensure it remains competitive without stretching your resources too thin.

Ask your CPA how to structure compensation to take advantage of any available tax incentives tied to employee benefits. They can also help you determine whether a raise or a bonus would be the most financially sound way to reward high-performing employees while keeping your bottom line in check.

Financing growth

Questions to ask:

• Based on my financial reports and forecasts, can my business accommodate growth?

• If I expand my product line or open a new location, do my financials look sustainable?

• What financing options are available for my expansion?

• What are the tax implications of growing my business?

• How should I adjust my financial projections to support expansion?

If you have big plans for the future, like opening a new location, expanding your product line, or taking on new markets, your CPA should be part of the conversation. Growth comes with financial challenges, and your CPA can help you assess whether your current financials can support expansion.

Discuss financing options, as well as the potential tax implications of growing your business. Your CPA can also adjust your financial projections to ensure sustainable growth, helping you plan ahead and avoid unexpected setbacks.

Succession planning and exit strategy

Questions to ask:

• What are my best options for exiting the business – selling, transferring, or passing it down?

• If I’m preparing to sell, what financial statements or records should I have ready for potential buyers?

• How can I position my business as an attractive investment?

• What should a succession plan look like if I want to pass the business down to a family member or employee?

• How can I minimize taxes and ensure a smooth transition?

Planning your business’s future is just as important as running it today. Whether you’re thinking about selling your business, passing it down to a family member, or transitioning ownership to a trusted employee, your CPA can offer strategic guidance.

Your CPA’s advice will depend on your exit strategy, so it’s important to keep them informed of your goals. If you plan to sell, for instance, potential buyers will review your financial records in detail. Your CPA can help ensure your financial statements are in top shape, determine whether you need any audited financials, and that your business is positioned as an attractive investment.

Regardless of your chosen exit path, ask your CPA about strategies for minimizing taxes and ensuring a smooth transition. Succession planning requires careful consideration, and your CPA can help you develop a plan that secures the future of your business.

The importance of ongoing communication with your CPA

Your relationship with your CPA should be personalized to fit your unique financial goals and situation. While this video offers some key topics to consider, it’s not exhaustive.

Whether you’re managing personal finances or running a business, regular communication with your CPA is crucial. These aren’t one-time conversations – staying in touch throughout the year ensures you’re making informed decisions that keep you on track. And talking to your CPA before you make a decision can help avoid issues as well and create greater value as you have someone who knows you and your business as well as the industry and tax law advising you as you make decisions.

If it’s been a while since your last meeting, now’s a great time to reconnect. To schedule an appointment with one of our expert advisors, please contact our office.