With tax penalties in place that could be as much as 5% a month, filing your taxes late as a business owner can be costly.
To make sure you meet the tax deadline this year and every year going forward, you need to stay organized and spend the time it takes to get your tax documents in order early on. This will speed up the process when it is time to file and ensure you hit those deadlines with ease.
1. Stay organized all year long.
For small business owners, filing tax returns can be a painful experience. Often, data is gathered over an evening or a weekend and can be incomplete. Stay organized all year. It winds up saving time and stress. Keep a separate file for taxes, and make sure income and expenses are categorized in the computer or ledger and are accurate. Then, it is just a matter of printing it out.
2. Keep good records of revenues and expenses.
Keeping good records of revenues and expenses on a daily/weekly basis will prevent a huge pileup at year’s end. Software like QuickBooks can help streamline the way you run your business. It can connect to your bank and payroll statements, etc. Not only does this make tax filing seamless, it keeps you in touch with the pulse of your business, always knowing your cash flow and net income/loss.
3. Stop spending time in Excel.
You should really stop trying to keep tabs on how your company is doing in Excel. Spend a few dollars a month to get a proper accounting platform in place. Sure, it’s another cost. And sure, it’s a system to set up. I get it. Doing this sooner will not only let you keep better tabs on your business, but come tax time, you and/or your CPA will be so much happier.
4. Set checkpoint meetings.
Proactive tax maintenance throughout the year leads to fewer surprises at filing time and a better understanding of your key performance indicators. Not only will you break tax prep into smaller ongoing chunks (such as quarterly), but if you structure your checkpoint meetings properly, you’ll better understand your income statement in no time. Know your numbers.
5. Rely on others’ expertise.
As small business owners, we want to control everything and know everything about our businesses. However, when it comes to taxes, it’s best to rely on the experts to figure out how to pay the lowest amount to the IRS. With the new tax law changes, it’s even more critical to work with a CPA and run the calculations to understand where the best strategies are for structuring our businesses.
6. Make taxes part of your financial planning.
Business owners should make taxes part of their overall financial planning. Begin working in tax planning for the current year in the spring. Then, in summer, ensure records are up to date. Toward the end of the year, meet with your planners to ensure you’ve maximized all possible tax reduction strategies. Come January, your taxes are ready because you planned them out for an entire year.
7. Always be ready.
If you’re following accounting best practices and using software such as QuickBooks, then filing your taxes should be a relatively simple matter for your tax professional — and it pays to use a professional. Make sure to take stock of your income and expenses in advance of your fiscal year end and consult with your accountant to avoid unpleasant surprises when it comes time to file.
8. Leverage specific tools.
Annual tax filings can be streamlined if incrementally addressed throughout the year. Do not wait for your accountant to ask for documents to start digging through old paperwork. Rather, simply share the well-maintained electronic file with them. Leverage one of the many free or inexpensive tools that organize and auto-code all business transactions; little work is required thereafter.
9. Allocate weekly time to track your taxes.
As a business owner, you are running around all day trying to keep the doors open but not tracking expenses accurately will shut the doors down before you could understand what happened. The IRS’ number one target is small business owners. Take at least one hour a week to do your checks and balances and track your expenses.
10. Break the effort down.
Compiling your business tax return is the act of reconciling the business payroll, sales tax filings, accounts receivable and payable to your bookkeeping efforts. The result is a set of financial statements that are used to create the return. A perpetual bookkeeping effort along with a good summary of the segments mentioned will save you hours of your CPA’s billable time and make return time easy.
Call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat about your small business tax health.