By Ray Barlow, VP of Accountant Solutions, Sage North America
The IRS began accepting tax returns on January 19, yet it’s a good bet that the lead story during local TV newscasts nationwide on April 18 will be the long lines of procrastinators standing outside their post offices waiting to make sure their returns are mailed on-time. If you’re running a small business, tax season gets even more complicated with all the various deadlines and forms confronting you. So it’s understandable if you find yourself putting it off. After all, you have meetings and deadlines that demand your attention right now. But don’t wait until the last minute, because that’s how mistakes are made. Here are some tips for how to ease the stress this tax season.
- Get organized: Stop using spreadsheets and keeping receipts and statements in a shoe box. Implement an accounting software solution to help you automate your financial processes. You’ll always have a handle on your company’s finances, and customizable detailed reports will make your yearly tax prep much simpler. You’ll also receive notification of the latest tax regulations and rates to help you file correctly and on-time.
- Don’t be late: Filing dates vary depending on whether you have a sole proprietorship or your business is incorporated. Sole proprietors can file by June 15, but interest will accrue on any taxes owing as of April 30.
- If you’re the owner of an incorporated business, you are required to file your taxes six months after your fiscal year end. As in the previous scenario, if you owe money your deadline for payment is earlier: two months after the year-end.
- If your business first generates income between Jan. 1 and April 1, your first tax payment is due by April 15. If it first earns income between April 1 and May 31, payment is due by June 15; between June 1 and Aug. 31, by Sept. 15; and between Aug. 31 and Jan. 1, by Jan. 15. These estimated payments include self-employment tax.
- Generally, state income tax and sales tax are also due by the end of the first period in which you earn taxable revenue. Taxes related to employees, such as workers’ compensation tax, is typically due soon after you pay your first employee.
- File your taxes, no matter what: At best, you’ll be slapped with fines, and at worst, you could face tax evasion charges. If you owe taxes, file on time even if you can’t pay the entire amount right away.
- Hire an accountant: Even though using accounting software can make managing your finances more efficient, I recommend working with an accountant instead of going it alone. Accountants understand tax, and their expertise and advice can be invaluable in today’s business environment when rules and regulations change frequently. An accountant can help ensure that your business remains compliant and is a critical step in maximizing your tax savings.
Accountants can turn your financial information into signposts guiding you down the road to success. They will interpret and analyze all the information that constantly streams into your business to help you make better decisions and grow your business. Collecting information is just the first step. Information without insights represents a missed opportunity.
Accountants can greatly reduce the likelihood of an audit, but there’s no such thing as a 100% guarantee that you will never receive that notification from the IRS. But I can guarantee you that an accountant will be critical to helping you get through one by turning the usually frustrating and daunting experience into a much easier process. An audit doesn’t need to be a scary process – it’s something thousands of business owners go through every year, and when you partner with an accountant you and ensure your day-to-day business is running properly, an audit is merely a report card that shows you’re on the right track.
You treat all your business appointments seriously and work hard in advance to prepare for each one. Make that your mindset this tax season: Prepare in advance to ensure you don’t file an incomplete return, and make sure you know when your deadlines are.
Implementing accounting software, particularly one that enables you to move all your financial records online – a.k.a. “The cloud” – will ensure all of your records are available to you and your accountant at a moment’s notice. No more dropping off a bag full of paper receipts and statements, or a USB thumb drive at your accountant’s office. Collaborating in the cloud enables you and your accountant to share and update information in real-time 24/7. You will remove the stress and burden of preparing your taxes from your shoulders, ensure you are in full compliance with tax rules and regulations that affect your business, and not let deadlines slip by you.