The Dreaded Tax Season

Tax FrustrationI have worked with over a hundred small businesses, through at least ten tax seasons, and most of them dread “tax season” as if it were a suspended jail sentence. They tremble at the thought of the word “audit” while attempting to re-write the myriad of IRS codes to justify their expenses.  Many businesses delay or even deny tax preparation, hoping their tax liabilities will magically be reduced or even disappear altogether.

Income tax preparation does not have to provoke a sense of heaviness or feelings of guilt.

There are some simple rules SMB’s can follow to avoid the penalties of procrastination, reduce the risk of non-business related expenses and enjoy a sense of freedom that comes from filing taxes correctly and on-time.Tax Burden

 

 

1. Avoid long hours in solitary confinement.

In other words, keep your books up-to-date, little by little, throughout the year and you won’t have to isolate yourself in your office to get ready for tax time.

By far, the biggest piece of advice I give my clients, is that they should be in their books, or bookkeeping program, the same days they are open for business. That means, all transactions, from income to expenses, should be entered immediately or at least consistently.

2. Keep an eye on your books.

The key to making sure books are current and accurate is to reconcile all bank and credit card accounts on a monthly basis. This will help catch errors and fraudulent transactions.  If you don’t have a receipt and it’s on your statement, question it.

3. Get organized.

After those receipts and sales have been entered into your bookkeeping system, file them immediately.  If you are paperless, scan them into your electronic files, which should be categorized by year in case of an audit.  If you keep paper files, put those supporting documents into your hard files, separated according to your financials (Income, COGS, Expenses, Assets, Liabilities).

I would highly suggest finding a versatile business printer to stay organized. The best tool I’ve found for keeping my folders up to date is my Brother MFC-L2740DW, which allows me to scan receipts into my Assets folder, highlight and remove any personal information, or fax files to my accountant.

  1. Know the law.

It is up to you to understand what a valid business deduction is and what it is not.  If you try to deduct that gym membership without doctor’s orders, it will be you that is held accountable.  If you don’t know where your tax home base is or the difference between a travel meal and an employee meal, set aside some training time. The best place to learn is from the IRS or AALLC.

I would really like to hear your thoughts on this post!

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