Tax season is a stressful time so here’s a step-by-step guide on how to better prepare for success:
1. Prepare your company financials
Your company needs to have financials because without financials, your tax preparer will not be able to efficiently prepare your return in the most accurate fashion.
This step should be taken throughout the tax year to ensure you are ready. The January after the year ends should really only be a time to wrap up loose ends and close your books.
Financials that are most important to file your company’s taxes include a profit and loss statement and balance sheet.
The profit and loss statement will include your income, cost of goods sold and expenses. The profit and loss statement should be prepared by utilizing all company bank statements and credit card statements.
The balance sheet shows your assets, liabilities and equity. This includes things such as loans your company may have, machinery, equipment, personal draws. and initial investment you put in your company.
If any company expenses or transactions have been received in other fashions such as your personal account (something we do not recommend) and/or cash, there are ways to record these transactions through journal entries. This is a step your bookkeeper/accountant should be able to assist on to ensure accurate recording.
Most companies have a professional bookkeeper to take care of their financials. A bookkeeper is helpful especially when your company has a handful or more transactions a month. Most companies that are operating are in need of this service. Having a professional handle this step will allow you to correctly categorize transactions in compliance with IRS regulations and generally accepted accounting practice.
A lot of the time, small businesses might think they don’t have enough transactions to have a bookkeeper or prepare financials. Our general rule of thumb is that even if you’re a small business, you need to keep track of the transactions your company has. Small business owners in early stages of their company often take the burden themselves and might begin bookkeeping without properly understanding where to book certain transactions. This can create problems and may open doors to IRS audits -a time-consuming headache we don’t wish for anyone.
We often get asked if small businesses can use Excel sheets to keep track of their company transactions. Although this might be something business owners can handle initially, the more their business grows the less they will be able to keep track efficiently in this fashion. We recommend at least using a bookkeeping software, such as QuickBooks, to have the proper software that will generate your reports. However, keep in mind that the quality of what you input is the quality that reflects on the reports. If you are not aware of all the tips and tricks accountants and bookkeepers know, it’s truly best to hire some help.
Overall, having these financials are crucial to ensure your tax preparer will be able to prepare your taxes.
2. Communicate with your tax preparer
Once you have your financials ready and have already distributed forms such as 1099s and W2s your company may process, it’s time to communicate with your tax preparer.
Provide your financials to your tax preparer. Depending on who your tax preparer is, they may have their own protocol regarding how to provide necessary documentation and what deadlines they may have to be able to file your return on time.
If you file with us, we typically ask you to upload all files to our secure portal. Once you are finished, we ask you to notify us. After that, we prepare on a first come first serve basis. Some returns may take as little as 24 hours to complete. Some may require a longer time which can take weeks depending on our backlog or unresolved lingering questions we may have with you.
3. Sit back and relax
Once your tax preparer is working on your return, you can sit back and relax.
Your tax preparer should contact you as they are completing and finishing your return, so stay alert to your emails and/or phone calls to ensure timely completion of your return.
Try to file your taxes on time. Delaying your filing may develop penalties and interest.
As a reminder, business tax returns (S corporation, C corporation, LLC partnerships) are due March 15th.
Sole proprietorships and single member LLCs are due with personal income taxes on April 15th.
4. Pay your taxes or collect your refund
Hopefully you’re receiving a refund, but if not, it’s time to pay your taxes and move on. Once you’re done with this final step you can focus on continuing to grow your business.
No one likes tax season, but it’s best to take care of it in a timely fashion so you have one less thing on your mind.
Need help with any of your bookkeeping or tax preparation? Contact us today and we’ll help you through this process. It should be painless!