When tax time rolls around, many business owners’ stress goes up exponentially. Navigating the sea of taxes, exemptions, regulations, deadlines and compliance can be a headache for the uninitiated.
Luckily, 14 experts from Forbes Finance Council are here to share some tips that can help organizations prepare for and file their taxes, saving the worry for more important things.
Photos courtesy of the individual members.
1. Perform Quarterly Reviews
Consider performing quarterly reviews of your financials. Carefully review your profit and loss statement along with all the expenses associated with your business to make sure everything is in order. Collect and neatly store tax documents as they come in. Most importantly, work together and communicate with your accounting professional so they fully understand your business. – Amir Eyal, Mylestone Plans LLC
2. Keep Your Accountant Apprised Of Changes
Check in with your tax accountant regularly throughout the year. Provide them with periodic financial statements and let them know if you’ve changed or added anything like fixed assets or if you’ve expanded your business. Getting the correct tax treatment for your transactions before the end of the year could save you thousands in tax liabilities or penalties. – Dana Schuman, The Pioneer Woman Mercantile
3. Buy More Time
Each year, I automatically prepare and file for an extension, allowing my team the necessary time to prepare audit files for sharing with our tax preparer and auditors. Don’t stress by setting yourself up for failure. File a request for a later deadline. – Anthony Holder, C&H Financial Services, Inc.
4. Build A Checklist From Last Year’s Documents
Gathering your tax documents is tedious at best. It’s easy to accidentally overlook something. An easy place to start is to see what you submitted the year before. Gather those documents, then ask yourself what is different about this year. Once you gather that differential, you’ll be in a good starting spot. – Aaron Spool, Eventus Advisory Group, LLC
5. Get Bookkeeping Done Early
What many business owners don’t realize is that bookkeeping and preparing financial statements comprise a completely separate (and prior) process to preparing the business tax return. An accounting firm can typically do both, but it extends and complicates the process in the middle of the busy season. Have your entire year of books reconciled by January—or even better, quarterly—to make Q&A during tax prep easier. – Jackie Meyer, Meyer Tax, The Concierge CPA Coach
6. Leave It To The Pros
Leave your tax filing and accounting to the professionals. Tax season is stressful enough—there’s no need to place any larger burden on your shoulders by handling your tax filing on your own. Although software tools have made it easier to file your taxes independently, allowing a professional to handle the job frees up more of your time to focus on core business operations. – Tyler Gallagher, Regal Assets
7. Look For Deductions During The Tax Year
As a recovering accountant, I would have clients come to an appointment after the tax year ended looking for ways to reduce their tax obligation. Their expectation was for us (the CPA firm) to reduce their tax bill after the fact. The best time to take the maximum allowed deductions and reduce your taxes is during the tax year. Consult with your tax professional during the tax year. – Matt Scott, 7xCapital.com
8. Collect Outstanding Payments
Payment collection can be tedious. Rather than allowing clients to walk away from unpaid invoices, use accounting platforms to keep payment collection organized and on track. Automating invoice reminders can alleviate stress by working for you, providing clients with friendly reminders and enforcing a timely collection policy. – Tony Ward, Xero
9. Get A Line Of Credit For Tax Bills
Tax season can add stress to your business, but that doesn’t mean everything else around you slows to a standstill—you’ll still have to cover overhead, payroll and more. Having access to a line of credit gives you a fast and simple way to cover these unexpected expenses. It won’t put you in a financial vise, either—you can choose to use the remaining funds for business growth, or not at all. – Joe Camberato, National Business Capital & Services
10. Don’t Wait For Your CPA’s Tax Packet
Too many business owners wait for their CPA’s tax packet to begin tax planning. By then it’s too late. Most of the moves you could have made are no longer available to you. My advice is to schedule a tax planning meeting with your CPA and financial advisor in early November at the latest. Then make your moves in December. This makes the tax season the following year a breeze. – Mia Erickson, Whitnell
11. Invest In Yourself
Consider investing money back into your business for equipment and growth instead of a qualified retirement plan. You very well may get a better return on your investment and much better tax treatment when you sell. A QRP only defers taxes that a business owner will eventually have to pay as ordinary income. An investment in your business will be taxed as capital gains or maybe not taxed at all! – Steve Ruckart, RAI Advisors
12. Avoid Unwanted Tax Surprises
While you will never get out of paying taxes, a business owner should never be surprised come tax time. We recommend having a solid relationship with your tax accountant. Meet with them quarterly instead of annually and keep communication open. That will help avoid any surprises from popping up and reduce stress around tax season. – Jody Grunden, Summit CPA Group
13. Separate Personal And Business Expenses
Keep all personal and business expenses separate throughout the year. If you are a small-business owner, make sure that every purchase and transaction that is specific to business needs has been completed through your business credit card or checking account. This way, when you sit down to file both personal and business taxes, everything is separated. – Jared Weitz, United Capital Source Inc.
14. Plan For Revenue Irregularities
The potential of writing a large-sum IRS check is stressful. To avoid that, businesses should set aside 10% more than what they’re expecting to pay come tax time. In addition to that pad, factor in an acceleration of payments in December and what your partners are doing to reduce their tax liability, and identify opportunities to employ those practices with your business’ own providers and partners. – Shawn Sweeney, Spinnaker Consulting Group