WHAT IS TAX SEASON?
Tax return season is usually from 1 January to 15 April each year. Individual taxpayers traditionally prepare their financial statements and reports for the previous year and file their tax returns. In the United States, individuals must file an annual tax return following any reported income by 15 April. Tax returns filed after the end of the tax season will incur a late filing penalty in your business and interest. The Internal Revenue Service (IRS) has announced that the US tax filing season begins on Monday, 24 January 2022, when the IRS begins accepting and processing tax returns for the 2021 tax year.
When tax time arrives, the stress of many business owners grows exponentially. In addition, navigating the sea of exemptions, regulations, taxes, deadlines, and compliance can be a headache for the uninitiated.
Luckily, 14 Forbes Financial Council experts are here to share tips to help organizations prepare and file their tax returns, saving them from worrying about more important things.
DO A QUARTERLY REVIEW
Consider doing a quarterly review of your finances. Carefully review your profit and loss statement and all expenses related to your business to ensure everything is in order. Collect and store tax documents neatly as they arrive. Most importantly, work together and communicate with your accounting professional, so they fully understand your business. – Amir Eyal, Mylestone Plans LLC
NOTIFY YOUR ACCOUNTANT OF CHANGES
Check with your tax accountant regularly throughout the year. Provide periodic financial reports and let them know if you have changed or added anything like fixed assets or business expansion. Getting the correct tax treatment for your transactions before the end of the year can save you thousands of dollars in taxes or penalties.
BUY MORE TIME
I automatically prepare and file renewals yearly, giving my team time to prepare audit files to share with our tax preparers and auditors. So don’t stress about preparing yourself to fail. Instead, submit a request for a later deadline. – Anthony Holder, C&H Financial Services, Inc.
BUILD A CHECKLIST FROM LAST YEAR’S DOCUMENTS
Collecting your tax documents takes a lot of work. It’s easy to accidentally forget something. Looking at what you filed the previous year is an easy place to start. Gather these materials, then ask yourself what different this year is. You’ll be in a good starting position when you get that difference back. –Aaron Spool, Eventus Advisory Group, LLC
BE AN ACCOUNTANT SOON
Many business owners must realize that bookkeeping and financial reporting are separate (and prior) processes for preparing a business tax return. An accounting firm can often do both, but this drags on and complicates the process in the middle of peak season.
LEAVE THAT TO THE PROS
Entrust your tax returns and accounting to professionals. Tax filing season is stressful enough – you don’t have to burden yourself with filing your own taxes. While software tools make it easier to file your tax returns independently, letting an expert handle the work frees up more time to focus on business activities. Core.
FIND DEDUCTIONS FOR THE TAX YEAR
As an accountant in recovery, I will ask clients to come to an appointment after the end of the tax year to find a way to reduce their tax liability. They expect us (the CPA company) to reduce their tax bill afterward. The best time to take your maximum allowable deductions and tax breaks is during the tax year. Consult with your tax professional during the tax year. – Matt Scott, 7xCapital.com
OVERDUE DEBT COLLECTION
Collecting payments can take time and effort. Instead of allowing customers to forgo unpaid bills, use an accounting platform to organize and track collection. Automating invoice reminders can reduce stress by doing the work for you, providing customers with friendly reminders, and enforcing a timely collection policy.
GET A CREDIT LINE FOR YOUR TAX BILL
Tax season can stress your business, but that doesn’t mean everything else around you slows down – you still need to cover overhead, payroll, and more. Access to a line of credit gives you a quick and easy way to cover those unexpected expenses. It also won’t put you in a financial bind – you can use the rest of the money to grow your business. –Joe Camberato, National Venture Capital & Services
DON’T WAIT FOR YOUR CPA TAX PLAN
Too many business owners wait for their CPA tax package to begin tax planning. Then it was too late. Most of the steps you may have taken are no longer available. I advise scheduling a tax planning meeting with your CPA and financial advisor by early November. So make your move in December. This makes next year’s tax season a breeze. – Mia Erickson, Whitnell
INVEST IN YOURSELF
Consider investing money back into your business for equipment and growth instead of a qualified retirement plan. You 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 not taxed at all! – Steve Ruckart, RAI Advisors
AVOID UNWANTED TAX SURPRISES
While you can only go with paying taxes, a business owner should never be surprised at tax time. We recommend having a close relationship with your tax accountant. Meet with relatives quarterly rather than once a year, and keep in touch openly. This will help avoid surprises and reduce stress during tax filing season. – Jody Grunden, Summit CPA Team
SEPARATE PERSONAL AND BUSINESS EXPENSES
Keep all personal and business expenses separate throughout the year. If you’re a small business owner, make sure that purchases and transactions specific to your business needs are made through your business credit card or checking account. Everything is separate when you file personal and business tax returns. — Jared Weitz, United Capital Source Inc.
EXTRAORDINARY INCOME PLANNING
The ability to write an IRS check for a large sum is stressful. To avoid this, businesses should set aside 10% more than they expected to pay at tax time. Beyond this block, consider accelerating payments in December and what your partners are doing to reduce their tax liability. Identify opportunities to adopt these practices with suppliers. Suppliers and partners of your own company.