You had a successful holiday selling season--but as the lights of the holiday fade, you need to start preparations for the looming tax season. If you're like me, you'd rather be doing just about anything else, but it's critically important that you don't push off your small business' taxes.
The first time I filed taxes for my business, I was nervous. I worried that there may have been costs overlooked, that I could be missing one of the key forms or that I'd miss a deadline.
I knew I needed assistance, but I was concerned about how much an advisor would cost. But, it was worth every penny and continues to be one of the best investments for my business.
I started by having five phone calls with potential advisors. I asked about their fees upfront, talked about whether they worked with businesses similar to mine, how long it takes them to file and how they'd ensure that we received all the relevant credits.
Then, I met with three of the advisors in person. If your advisor isn't invested in you and your business, they may not prioritize you. Most people have the same filing deadlines, which means I make sure I have a personal relationship with my advisor so we don't get lost in the shuffle of tax season. Plus, I start early.
You will save yourself innumerable headaches and potential costly errors by following these four steps. Even better--get on track now and set yourself up for smooth sailings next year too.
1. Don't procrastinate.
Contact your accountant early in the year. That means now. If you don't have one, get one.
If you wait, your accountant may get too busy to file in time for you. Setting up a meeting with your accountant in January will help to keep you on track for filing and prevent you from putting off your collection of information and documents.
Stop trying to save a few dollars by preparing our business taxes ourselves--no amount of internet searching will make you an expert. You may think you're saving money by doing the tax work yourself, but you may wind up paying more in errors and omissions.
My advisors alerted me to small business research and development tax credits, which have been useful. If you're a veteran, there are additional credits available--and many that you likely don't have time to dig up yourself.
Now is also the time to verify what deductions you may be allowed to take for the next year.
2. Organize, organize, organize.
Gather all your documents. If you have been very efficient, you have already created new files for the new year and gathered all files pertaining to the current tax year.
If you haven't been as organized, then resolve to set up now for the next year. This should entail keeping a list of all your tax deductible expenses and back-up receipts.
Keep a file for each month. If you are using paper files, keep all your receipts and banking receipts. Better yet, try converting your paper receipts to digital documents. You can use tools like Expensify and Abacus to help.
Be diligent and devote a couple of hours a month toward organization. This small time investment will prevent an overwhelming backlog at tax time.
3. Stay in the cloud.
Find a small business accounting system that will digitize your efforts. A shoebox is not good enough for your business. Tools like Xero and Quickbooks are cost-effective and easy to use. Producing your own reports will save money in accounting fees and potential costly errors. You can also give your accountant direct access to the reports--a real time saver.
Quickbooks will also let you run your payroll through them so it's all in one spot. Using a payroll service will streamline your time throughout the year and especially at year end for taxes. You can use standalone services too like Gusto to simplify your small business finances and let you get back to what you actually love: your business.
All taxes with these products will be paid on time and all reports issued. Again, very often your accountant can be granted direct access to reports.
4. Mail your 1099 forms.
If you paid an independent contractor more than $600 for the calendar year, you must issue a 1099. An early appointment with your accountant will help you with the 1099 issuance if you're unsure how to do this.
We all want to minimize stress and maximize efficiency. Don't fall for the fallacy that working under pressure will improve performance. If you keep organized throughout the year, then tax time will not be the burden that you fear. Now is also the time to verify what deductions you may be allowed to take for the next year.