Business owners and their accountants remain busy dealing with financial numbers throughout the year. But as soon as the tax season comes, it brings along a series of additional responsibilities — tax preparation tasks.
It requires significant effort and is time-consuming to pull out the previous year’s receipts and statements. Plus, it necessitates that you work for extended hours, and do everything needed to file accurate taxes and meet compliance.
Why is tax season a crucial time for business owners?
Tax preparation is comprehensive and complex, especially if you do your own business taxes. So, be prepared to pull out considerable time from your daily schedule, putting aside some core roles.
Additionally, since you are probably not a tax expert, you might end up putting your firm at risk of an audit. Here are the most common reasons businesses get audited:
- typos, errors, or overlooked mistakes;
- filing wrong forms;
- reporting incorrect financial information;
- regularly filing tax returns post due date; and
- filing excessive write-offs.
Due to the above-mentioned reasons, many firms choose tax preparation outsourcing. This preemptive tactic ensures taxes are managed well in the hands of professionals. However, there are many solutions to prepare your business taxes and make this time a little more manageable.
Six Tips to Deal with the Busy Tax Season
1. Start now.
First things first. Make it a habit of updating your books daily or weekly.
Maintaining your financial information timely can help make things a lot easier for the hectic tax times. Like everyone else, you also don’t want to spend your weekends digging into invoices and receipts to meet the deadline.
Keeping all things aside, though tax season seems a difficult time, you need not worry. Even if you don’t have your financial papers yet, don’t worry! Instead, start today. You can even start now. As soon as something reminds you of taxes, do some work for it.
For example, you can start collecting all the information required and prepare a data set for other processes. Getting started as soon as possible will speed up tax preparation and reduce the associated burden and stress.
2. Review all transactions to ensure accuracy.
When it comes to calculating business taxes, you need high-quality financial data. And to make sure the numbers are correct, bank account reconciliation is the best way to go.
This side-by-side comparison between your company’s books and bank account statements reveals mismatched entries (mistakes or errors). These errors can result in ruining tax calculations.
Bank account reconciliation also gives you more reliable information to determine your tax liability. You should review transactions regularly. Why do this? You must have correct numbers for tax filing to meet GAAP guidelines. By doing that, you avoid penalties and comply with regulations.
Business professionals may also benefit from errors and omissions insurance that shields them against financial errors or negligence.
3. Organize all financial papers.
One of the best ways to make your tax season hassle-free is to update your financial record from time. Also, you want to keep your records organized — always.
The IRS mandates documented proof if you apply for tax deductions. Thus, having an organized, quickly-accessible set of financial records can help reduce tax prep time and effort.
However, if you have never maintained any records, now is the time to spend some hours collecting the required information. This information includes:
- personal details;
- business information;
- important financial documents (like income statements, P&L statements, balance sheets, etc.); and
- financial reports.
Also, make sure you do it quickly. As soon as you organize the information, it will be easier to prepare tax files. Not only will you be able to find the necessary documents, but you will also file your taxes on time.
4. Take advantage of technology.
Technology has advanced quickly in the last two decades. Today, most businesses depend upon it for many processes. You may also consider leveraging technology for your accounting and tax preparation needs.
A wide variety of software applications are available in the market. These applications can assist with various financial accounting functions such as expense tracking, generating statements and customized reports, determining deductions.
All these tasks are necessary for tax filing purposes. The software can help perform the same easily and quickly, making your tax season less complicated and hectic.
Moreover, various tax institutions worldwide, like the IRS, allow users to file their taxes via approved online tax-filing platforms electronically.
5. Keep yourself updated about tax laws and news.
Tax laws often change. Therefore, even if you have deep knowledge of regulations, it is always beneficial to review them before preparing your taxes.
For example, you might be eligible to file some COVID-related tax credits due to the recent pandemic. But if you are not keeping yourself updated about the latest changes in tax laws, you might miss such opportunities.
Since inflation impacted the economy, the income tax brackets in the U.S. will most likely be higher in 2022. Additionally, some tax rules might be retroactive to the fiscal year 2021-22.
Fortunately, you can keep updated about tax law amendments by subscribing to news alerts and resources providing authentic information. If you cannot find any resources you trust, consult a professional and ask them for help finding resources.
6. Do not hesitate to get external support.
Being a business owner, you likely have minimal knowledge of taxation regulations. However, even if you have excellent tax accounting skills, there’s only so much you can manage on your own.
Tax preparation is complicated. The level of expertise it requires and the sudden increase in tax workload impact the busy tax season’s challenges. If you face issues managing your taxes timely, it is best to seek external support.
The sooner you involve a professional tax preparer, the better you’d be prepared for taxes.
Many businesses consider tax preparation outsourcing a strategic option. Outsourcing ensures timely tax preparation, saves on tax prep costs, and enables in-house teams to focus on daily roles. You may also outsource tax preparation to reap these and other relevant benefits.
Improving Your Tax Season
There are ways you can make your tax season a little smoother and more efficient. If you have a set of documents organized in the best manner, ready to be used for tax filing.
Additionally, you can choose a reliable partner to handle your tax preparation. Doing so will let you have all your focus devoted to core business and growth.
The bottom line is setting yourself up for success allows you to stay focused, even during the busiest tax seasons.