If your company is growing quickly, tax experts urge you to pay close attention to your tax situation and the changes growth brings. A PricewaterhouseCoopers survey released in September 2004 found that nearly half of the 392 CEOs of privately held fast-growth companies expect a big jump in their federal business taxes over the next two years. The surveyed companies range in size from approximately $5 million to $150 million in revenue/sales. Companies anticipating the biggest tax increases were made up of the fastest growers, who say they expect a 23.9 percent increase in revenue over the next 12 months.
Some 54 percent of those interviewed for the survey say corporate tax planning is not completely integrated into their business plans for the next 12 to 24 months. Don't take this risk with your own company--relying on an ad hoc or reactive approach to taxes could get you into trouble, or at least hurt your chances of trimming your tax bill.
Your tax advisor should take the initiative and provide helpful, strategic tax-planning steps, including alerting you to recent changes in tax laws. If you're not getting this kind of guidance, it may be time to find someone new.
It's also important to pay close attention to your state tax situation. "State taxes become more and more complex as a company grows and begins to operate in more than one state," says Marty Janowiecki, tax partner at PricewaterhouseCoopers' Private Company Services practice, a Washington, DC-based integrated team of audit, tax, and advisory professionals who focus on private companies. For example, it's important to document losses in the state in which you are operating by filing returns there so you can use them to offset future income in that state.
The Pricewaterhouse-Coopers survey also found that 61 percent of those interviewed were not aware that the IRS is adding significant staffing over the next few years to increase audits of companies with assets ranging from $10 million to $250 million. Only 44 percent said this increase in audits would cause them to be more cautious in their tax planning.
To avoid problems with audits, Janowiecki says to make sure your business follows the proper accounting methods and that adequate documentation exists to support the positions reported in your tax return.
Great Falls, Virginia, writer Joan Szabo has reported on tax issues for 18 years.