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I made a profit? SO .....Where is the money?

Posted on Friday, November 4, 2016 at 06:24AM by Registered CommenterEarl L. Sigmund | CommentsPost a Comment

 

 

 

This is a common expression voiced by business owners when their accountant informs them of their businesses' bottom line for the year? It kind of tells me that there was a real disconnect between the bookkeeper and the business owner; or a real lack of understanding regarding just what items paid out in a business are tax deductible and which items are not (or maybe the timing of the tax deduction is deferred in part to a future date).  

 

Why does this disconnect between owner and accountant occur?

 

   The business owner may be overwhelmed by the chores of running a business, and as a result the owner was never properly educated on exactly how a business works for tax purposes. For example, the owner may have just bought a large capital item for the business which greatly reduced his cash balance, but only very slightly reduced his profit for tax purposes since such an expenditure may be deferred to a future year or years for that matter. The owner also may have thought that items such as loan repayments are 100% tax deducible when in fact only the interest portion of that loan repayment check is tax deductible.

The conclusion:  

Business owners somehow have to make the time in their busy lives to learn and then monitor the financial end of their businesses so that the shock of a tax profit is eliminated once and for all. 

 

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