“Nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin in 1789. So, so true. However, proper preparation for taxes can make the process a bit less painful, and a whole lot easier.
Every year, from about mid-March, millions of Americans begin the mad rush to prepare all of the paperwork necessary to file a month later. For small business owners it can be next to impossible getting the tax work done in time, while maintaining ‘business-as-usual.’
Besides the obvious extra time and hassle that nobody really wants to deal with focusing on taxes every spring, there are many other significant advantages to beginning the tax preparation several months in advance, some of which can be quite lucrative.
First of all, a meeting with your accountant in the middle of the year allows you to assess the financial situation of your business in relation to your expectations at the beginning of the year. If you are exceeding your projected goals, you can find ways to reduce the projected taxes by purchasing equipment necessary for your company that may not have been budgeted for. If your profits are not meeting expectations, reducing your estimated taxes will help you not over-pay the IRS in April.
Knowledge is the key. Knowing exactly where your business stands will allow you to pay only the taxes that are required – overpaying your taxes can only be recovered when you file the following year, and to avoid underpaying and facing the fines that can accompany even an inadvertent mistake in that realm.
According to the US Small Business Administration, nearly 90% of small business owners turn to tax professionals to prepare their annual returns rather than doing their own taxes. If you are already working with an accountant who is aware of the tax laws relevant to your business, as well as what changes can be expected in tax laws in the coming year, then it only makes sense to meet with the accountant well enough in advance to make use of the laws that can help your business spend as little as possible on its taxes.
This need not be the case. There are several reasonably simple, non-time-consuming steps can help you can file your annual tax returns much more easily, with far less stress, and most importantly, without taking you away from the daily operations of your business and it just takes a few hours per month.
Of course, this does not discount the time factor. Millions of Americans – individuals and businesses – wait until the last minute to file their tax returns. Once the panic sets it, there is no time to focus on anything other than getting all of the relevant paperwork organized and fast. Small business owners can do themselves a tremendous service by keeping track of records, making certain they’re well organized and easily accessible. This includes sales records, inventory, returns and allowances, expenses, payroll, travel, advertising, office supplies, rent and utilities.
Spending an hour or two every month to keep all of these records up-to-date in a well-organized filing system will make the process go much more smoothly, thus enabling you, the business owner, to focus on much more important things – like running your business.