Preparing Your Small Business for Tax Season
No matter how on top of your business you are, the words “tax season” likely come along with a groan. Even if you’re a fastidious business owner, the hassle of filing taxes can be exasperating, especially if you attempt to do everything yourself.
Consider having someone else take care of bookkeeping for you to eliminate the stress of closing out your books at year end. Whether you end up doing it yourself with accounting software or end up hiring it out to a third-party service, here are some basic tips for preparing your business for this upcoming tax season.
Hire a professional bookkeeper to prevent rework
Financial organization and filing can be an absolute mess if you don’t know what you’re doing. Proper bookkeeping will take you much longer to do than a professional, and honestly, you likely have to hire an accountant to redo it anyways. The kicker here is: you’ll need help the same time as everyone else which will make it much more expensive
Hiring someone to do it for you will make everything in your business run much more smoothly, and is honestly much more feasible than it used to be. Outsourcing your bookkeeping, payroll, and accounting can help you immensely, and can often be done all in one step. Also consider an ein filing service to further save time.
Even if you’ve figured out the basics, you simply are not a professional versed in tax legislation, and will likely mess up some aspect of your taxes. The IRS’s statistics show around 40% of all small businesses end up with penalties for incorrectly processing and recording payroll, and these average around $845 per small business. Save yourself the stress, money, and time, and just hire someone to do it correctly. Everything from payroll to payables receivable and even the llc tax form.
Collaborate with your accountant
If your financial professionals are disjointed and working without each other’s knowledge, you’re bound to make a costly mistake. If there is miscommunication between your bookkeeper and your tax preparer, problems can arise.
Many bookkeepers and tax preppers will tell you they prefer to be in touch with their client’s various financial professionals, as it makes the process much more clear and streamlined. Introduce your bookkeeping team to your accountant and agree on the preferred method of communication and file-sharing.
You can also avoid this step by consolidating your bookkeeping and tax services to one provider. Many bookkeeping services also offer payroll and accounting options. Figure out how to best share information and documentation with your bookkeeping/taxes team.
Do you use Google Drive to share documents? Or do you use cloud-based software that you can all access? Ideally you should work on this before the beginning of the tax season so that everything is in order and working smoothly before crunch time.
Give your bookkeeping team feedback
Maintaining accurate and timely bookkeeping is a year-long, daily endeavor that many businesses fail to accomplish. If you tackle your books yourself, make sure you close out your business activities every month. Monthly bookkeeping tasks should include generating financial statements, including a balance sheet and income statement.
If you work partially with an outsourced service, make sure you complete everything you said you would. Luckily, it’s very easy to hand this over to a remote service and let them handle it– figure out what the smartest business move is for your business individually, then stay on top of it. Keeping it organized throughout the year ensures that tax season will be as least painful as possible.
Become a tax expert for your business
A professional can help you understand exactly what you need to be doing on a daily, monthly, and annual basis to stay tax compliant. Even if you decide not to hire someone on permanently for these services, it’s a good idea to get a general financial consultation at the beginning of your business journey to figure out exactly what your tax responsibilities are.
For example, do you need to be setting anything aside for things like sales tax, and if so, how much? A professional can help you ascertain that yes, you have nexus in your state and need to pay sales tax, and probably point you towards other self-use resources if you need them, such as apps like TaxJar. If you try to take care of things yourself, you can be met with a nasty shock at the end of the year if you weren’t prepared.
The takeaway here is this: Hiring a professional will make everything exponentially easier for everyone involved, but even if you decide to take care of it yourself, it’s something that needs to be done throughout the year to ensure that your taxes run smoothly when the time comes. Know what your needs are, and be prepared at all times.