Kazutomo Shimizu is a bilingual, licensed tax attorney based in Yokohama and a long-time supporter of our magazine. We recently spoke to him about accounting, money and life.
People often say that a good accountant will actually save you money, not just hassle; in other words, the money they can save you can sometimes pay for their fees. Can you give more concrete examples/cases of how this might work?
You can legally save on taxes by having an accountant. For example, if you are a business owner, there is a system called blue return. When people choose that system, they qualify for a deduction in business income and/or real estate income up to a certain amount of money. There are three different deductions: ¥100,000, ¥550,000, and ¥650,000, but if a person lacks knowledge of bookkeeping, they’ll likely get the least amount of deduction.
As another example, if you ask an accountant to handle “double-entry bookkeeping”, or have them check the books you kept, your bookkeeping should be in order, allowing you to take a deduction of ¥550,000. Furthermore, by filing the final tax return electronically, you receive the maximum deduction (¥650,000).
Unless your accountant is ancient, they probably use e-tax. So again, if you do bookkeeping by yourself, you’ll only get the ¥100,000 deduction. But with an accountant, you can deduct ¥650,000. You’re looking at a difference of ¥550,000, depending on the taxpayer, of course, so that translates to a reduction of more than ¥100,000 in taxes to be paid.
Additionally, the fees you pay for an accountant can be included as necessary expenses. Thus, the total amount of money you save will either outweigh or absorb most of the cost.
Why are good accountants essential to a small business (again, concrete examples)?
Although it’s not hard to keep books or do tax returns, some parts require very specific knowledge. The double-entry bookkeeping that I mentioned earlier is one of them. Also, international residents usually have to deal with international taxation and there are a limited number of accountants who can handle it.
It’s nearly impossible for someone to manage this by themselves, and it distracts them from their actual work. It’s also very expensive to hire an accountant from a well-known company and I suspect a lot of the work they do is just robotic in a way.
What are some ways people and/or small businesses can save money from your perspective as an accountant? What strategies do you recommend?
It’s important to choose an accountant with whom you can communicate smoothly, since your final tax return is a yearly ritual. When you build a long term relationship with a good accountant, you can consult them about broader topics such as your inheritance tax in the future, or something unrelated to taxation.
Conversely, what are some pitfalls to avoid?
Tax audits can happen at any time. If you falsely file your taxes and get caught by the tax office, you will face a penalty (additional tax). For international residents, having your tax records in order is crucial for residency. To avoid any unwanted trouble, it’s important to file and pay taxes properly.
Do you have any personal success stories you can share where you were hired to help a business whose bookkeeping was a mess? What sort of disasters/trouble have you seen that you’ve helped fix?
There was a case with one of my clients from Europe. They were submitting a file of all of their receipts as well as an Excel sheet regularly. I would fix them and do double bookkeeping. At first, everything was organized inconsistently, but I improved the methods and provided a proper format on Excel. This helped them better create records that we can now work with much more efficiently.
I also record my accounting data in graphs so my clients can understand changes in their business situation easily. My clients are quite happy with this service.
Moreover, tax returns for business income are written in Japanese and it’s hard to understand even for Japanese as it’s full of professional terms. I provide English versions of the front page of tax returns. This has also gotten positive feedback from my clients.
An interesting cultural question for you: do you see much of a difference in attitudes toward money between Japan and international residents?
I think attitudes toward money depend on individuals and not nationalities. However, there are indeed great differences in cultures. Japanese people tend to think that information is free and are not always inclined to pay for services like advice from professionals. My international clients are different in that regard. For example, if you have a 30-min meeting on Zoom, Japanese will often assume it’s free unless you point this out. International residents, on the other hand, ask “So, how shall I pay for this consulting?”. This is a big difference in cultures.
If you’ve ever splurged/been extravagant with money, what was it for?
When I book an airplane ticket to travel internationally, I choose business class. Though I use mileage, I feel like I am treating myself.
What’s your opinion of the phrase, “Money doesn’t buy happiness”?
I’ve worked at two different international companies. The first company didn’t offer significant salary increases based on my contributions so I switched to a company that offered a 1.5x increase. However, the job naturally involved many more work demands. Looking back, I wasn’t happy though the salary was much higher. Happiness requires money to some extent, but if your goal is only money, it becomes like an addiction and you lose sight of the real meaning of life.
Hypothetical: you suddenly receive ¥1,000,000. What would you do with it?
It depends on my savings at that moment, but it would probably be an investment in my work (buying specialized books), consumerism (traveling) or a donation to public organizations.
I see that you studied at UT, Austin. What did you enjoy about that funky town?
It was like 30 years ago. We didn’t even have Starbucks at that time. Instead, I enjoyed relaxing everyday after class over donuts and coffee at a donut place on campus.