Tax Planning and Preparation for Marketing Agencies

Tax Planning and Tax Preparation Services

for media, marketing and advertising agencies

Tax planning plays an important role in your agency's financial health

Whether you’re a freelancer or the founder of a fully staffed marketing agency, tax planning and preparation should play an important role in your business. If your agency is profitable (and sometimes if it’s not), taxes are inevitable. The goal: decrease that amount of taxes as much as possible. That’s where our smart tax strategies come in. 

As a licensed Certified Public Accountant (CPA), my goal is to: 

maximize your tax refunds

serve as your professional, responsive guide

become a trusted advisor you can rely on

My team can help your marketing, advertising or creative agency optimize your choice of entity, such as advising to be taxed as an S Corp so your agency saves on self-employment taxes; take advantage of the Research & Development Tax Credit; and maximize your QBI deduction.

The ever-changing tax laws are complicated. Can I write this off? Will this get me audited? Am I getting back what I deserve? These are questions we can help you answer.

I’m a freelancer. Can I afford a tax professional?

Yes, do-it-yourself tax preparation options like TurboTax are cheap. But will you have the same attention to detail as a trained professional? Do you keep up with tax laws — including important tax deadlines, tax forms, tax credits and changes to deductions?

A professional accountant or a Certified Public Accountant (CPA) has the educational background, the training and the experience to not only answer these questions but help you grow smarter. Professional accountants are there to not only fulfill basic business accounting functions but also a variety of other financial and business management services as well.

More than 60% of marketing and advertising agencies employing up to 4 people, but many struggle with understanding reasonable compensation for owners. Did you know that salaries considered too low by the IRS could trigger an audit? The average net profit margin for a marketing agency is somewhere between 6.0% and 12.0%, which means there’s room for growth that should be safeguarded from unnecessary taxes.

A trusted and qualified accountant can help guide marketing agencies of all sizes meet their financial goals while considering tax implications.

The bottom line:

Would you rather be working on your marketing agency or in your marketing agency?

3 Bad Habits that Agencies Need to Avoid

Like many business owners, freelancers and marketing agency owners can develop bad accounting and finance habits.  Here are some common traps that they should avoid.

What taxes do marketing agencies have to pay?

If you want to grow your marketing agency, then you want money. And if you want money, you will have to pay taxes. Service-based industries sometimes present challenges when it comes to understanding all of the taxes your marketing agency has to pay.

Income Tax

If you have a source of income, federal income tax is an inevitability for every individual in the United States. Apart from federal tax, 41 states require their residents to pay state income tax. Normally, you can file federal and state tax return simultaneously.

States like Texas, Nevada, Washington, Alaska, and a few others don't have a state income tax. In comparison, New Hampshire and Tennessee only pose income tax on dividends and interest. Everyone from an individual to a company is liable to pay income tax.

For marketing agencies, income tax can be surprisingly tricky. For instance, if your agency is taxed as an S Corp, there are a set of facts and circumstances the IRS considers when determining whether an owner’s compensation is reasonable. Any salary deemed too low could trigger an audit, or worse, loss of your agency’s S Corp status.

Sales Tax

If you are shopping in the United States, you may see sales tax levied on certain items. The sales tax is an important revenue generation source; therefore, merchants collect sales tax whenever they sell goods to consumers.

Marketing agencies that offer pay-per-click (PPC) advertising services, such as Google Adwords, may be subject to sales tax. New Mexico, South Dakota and West Virginia, for example, implement taxes on these services, especially if you charge commissions or other fees for placing PPC ads.

Since Google generally does not charge tax on Adwords, some states require agencies to charge their clients sales tax. While some states don’t charge sales taxes on such advertising services, states such as California and New York charge taxes on certain qualified print materials and some finished artwork.

Property Tax

For marketing agency owners who own any type of real estate —such as an apartment, house, commercial shop, or a building — must pay property tax. The rate of property tax varies significantly from state to state with a rate dependent on the city, town, or county.

The property rate in different localities may differ because the tax is generally imposed on the value of the property. Property value is typically different from the market-value, which means that property owners may pay higher or lower tax based on the evaluation by authorities.

High-net-worth Tax

Based on individual financial circumstances, there are certain taxes that can decide the fate of high-net-worth individuals. If you leave an estate valued at more than $11.8 million, your heirs may need to pay as much as 40% to receive the property.

What tax forms do marketing agencies need?

Personal income and business income is regarded as two separate sources of income. Commingling funds is a common accounting mistake many marketing agencies make, and it posits a serious problem with legal implications. For instance, limited liability companies could lose their liability protection — due to “piercing the corporate veil” — because you’re exposing your personal assets.

Like everyone else, marketing agency owners and staff may be required to fill out the following employment forms:

Time To Plan - Shutterstock Licensed

Another common tax return form is form 1120 used by C Corporations for income tax. Unlike S Corporation, whose profits are passed through to shareholders, the profits of a C Corporation are taxed separately from its owners under subchapter C of the Internal Revenue Code. C Corporations are owned by shareholders with a board of directors that make decisions and oversee policies. its profits are taxed separately from its owners under subchapter C of the Internal Revenue Code.

Independent contractors and freelancers are required to submit W-9 forms — which is a record of your name, address, phone number, social security number of tax identification number. Marketing agencies need to hold on to W-9 forms when they hire freelancers, subcontractors or vendors. While the IRS does not require the W-9 form when it comes time to tax filing, agencies need the form on hand when they submit 1099 to record payments of $600 or more.

What tax deadlines and extensions marketing agencies should know?

During the first quarter of every year, there is a lot of activity because many tax deadlines for businesses fall in the first quarter. Historically, April has always remained important because it is the month when individual taxes are filed. The last day to file individual 1040 tax form is generally April 15th.

If you own a business, it is equally important to keep an eye on April 15th deadline, which is when C Corporations are required to file their tax returns. For other marketing agency entities, such as S Corporations, the deadline to file the income tax return is March 15th. In 2019, the government has extended the dates of tax filing for C Corporations to October 15th, and the S Corporation extended deadline is September 15th.

Typically, most deadlines end by April 15th. A CPA can consult on which tax forms are due when. They also can help you file for an extension, or calculate estimated tax payments, if required.

What documents do marketing agencies need for tax preparation and planning?

Save time (and money) before consulting a tax professional by providing all of your financial and personal information necessary, including social security numbers and dates of birth of your family members.

Provide any information about the sources of your income:

freelance gigs,

commissions,

sponsorships,

income from the sale of a property,

profits from investments.

Additionally, compile as much information that you can to increase tax refunds, such as IRA contributions, energy credits and student loan interest.

It’s also helpful to organize information about all of the taxes that you've paid, from state and local taxes to real estate tax and personal property tax. Do you have any other tax deductions and credits that could aid in a tax refund? This could include advance child tax credit, child care costs and education costs.

Get organized!

Get your tax documents organized with Chris Hervochon's free tax organizer. Download today!

Why should marketing agencies hire a CPA for tax filing?

A CPA is a professional who is highly educated and who has passed standardized exams and receives yearly continuing education in order to maintain their status.

It’s common to lump CPAs in the same category as other accounting professionals. However, an accountant cannot legally provide the same services as a CPA. This includes auditing financial statements or representing taxpayers before the IRS. On the other hand, an accountant’s qualifications range from professionals with limited experience to highly qualified experts.

Accountants do not necessarily have an accounting degree whereas a CPA must have a minimum of 150 semester hours — with a certain percentage of those hours dedicated to business or accounting. The state board of accountancy in each state and territory is responsible for determining who qualifies for the CPA exam — which is in four parts and is unified across all states and territories At present, the pass rates for each part are around 50%.

IRS Representation

If the worst case scenario occurs, only CPAs can represent you in the event of an audit with the IRS. A qualified CPA is authorized to represent clients at the highest-level, which means that you don't need to worry if you ever get a notice from IRS. A CPA is well-trained to sort out pending issues with the IRS on your behalf.

How can a CPA help freelancers and marketing agencies?

Small one-person operations and large, robust marketing agencies commonly seek guidance from CPAs regarding their business’ financial health, such as income statements, balance sheets, and statements of cash flows.

As virtual CFOs, CPAs help take the load off administrative tasks and help save money in the long run for marketing agencies of all sizes.

Outsourcing accounting and finance functions allows even small agencies to receive top-level help from a professional on an as-needed basis without paying salaries of a full-time CFO. In this role, CPAs perform or oversee:

basic bookkeeping,

account reconciliations,

financial statements,

ad hoc reporting,

cash flow management & forecasting,

payroll,

make sales tax payments and complete other tax compliance duties.

Virtual CFOs help marketing agencies grow smarter, meeting their goals by working on their agency’s business and financial intelligence with viable proven strategies — including:

cash flow management,

cash flow management,

forecasting,

budgeting,

investment guidance.

Ready to work with a CPA for tax preparation and planning?

Build a strong foundation for your marketing agency that includes maximizing your tax returns. Fill out the information below to get started. We need this information to better serve you.

CLIENT REVIEWS

See what past clients are saying

Joe Miller, CPA

Accounting Professional

I had the opportunity to work with Chris for the past several years and it was truly a pleasure. Chris is not only an excellent technical accountant, but has a tremendous understanding of how the accounting processes work within the context of operating the business. He has improved processes, developed new procedures and created efficient workflows that have allowed the accounting department and upper level management to analyze, utilize and make sound business decisions based on faster and more accurate information. The combination of operational business knowledge and technical accounting skills make Chris an unbelievable asset to have in your corner.

 

Eric South

Accounting Professional

There are not many people I would vouch for more strongly than Chris. I’ve had the pleasure of not only working with him professionally but I also got to know him personally.

Chris exemplifies strong critical thinking and problem solving. His broad knowledge base of both accounting and taxation, encompassed with his exemplary analytical skills (most especially Excel) and his strong understanding of the stock market and the global economy makes him such a well rounded professional.

I knew it was only a matter of time before he worked on his own venture. Individuals like Chris are born to lead. As always, I wish you nothing but success. If you ever need anything at all, please reach out.

 

Eric Dowd, CPA

Certified Public Accountant

I had the opportunity to work with Chris over the past three and a half years at eviCore healthcare. Chris possesses both technical accounting expertise along with a deep understanding of technology and business processes, which is unique to the industry. During our time at eviCore Chris constantly served as project lead on initiatives aimed at improving processes and driving the finance department forward through increased automation and work flow improvement. Chris’ abilities as a technical accountant, along with his understanding of technology, position him to serve as an invaluable asset to his clients and their businesses.

 

Allan Gaherty

Accounting Professional

In the time I worked with Chris at eviCore Healthcare he displayed superb accounting and financial skills and was always in the forefront of the implementation of new workplace technologies which greatly enhanced the productivity of all of the finance department. He was a team player who was always ready to share his expertise with other members of the group. During his tenure the company went through several complex M&A deals and Chris' insight and overall knowledge was much needed in the successful completion of these transactions.

 

Sharad Daswani

I was introduced to Chris by a bookkeeping firm after I mentioned I needed a quality tax accountant. Chris has exceeded the expectations. I have worked with Chris for a few years to prepare my individual and company taxes. He is Efficient. Timely. Knowledgeable. There have been many instances where Chris had to research additional information regarding tax code/implications and he not only came back with a “Yes/No” response but also provided an explanation in layman terms. Chris is a professional who provides great service and has a passion for what he does. All these qualities make for a great tax accountant.

 

Brian Zeiders

Chris was awesome to work with. He crunched some numbers for a business I was looking to buy. Once he ran all of the numbers he then took the time to break down the complex items for me and tell me what each item represented in terms that i could understand easily. I would highly recommend his services.

 

Christopher Linkimer

Vice President of Finance

Chris is a highly capable accountant, both from the perspective of technical accounting rules and practical, technology-driven solutions. Our company went through several M&A transactions during his tenure as a Senior Accountant and Accounting Manager, and he was a key member of the team evaluating the GAAP implications of these complex arrangements. Subsequently as the Finance Director for my product group, he automated several recurring processes and built financial models for new product development and existing product revenue forecasting.

Steve Wooster

I have used SOAR for over a decade. I would not trust anyone else with my taxes other than Chris. His dedication to each client is unparalleled and is extremely knowledgeable. Chris ensures every client has a personal experience and is very quick to answer any questions you might have. I am so impressed with his work that I have recommended him to my entire family.

 

Blake Taylor

Great to work with. Chris is very helpful and highly professional. This is my second year using Chris for my tax return. I trust Chris and would recommend him to everyone.

 

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