Preparing for Next Tax Season: Why It Pays to Be Proactive
In a lot of ways, finishing paperwork for the taxes over the last year can be a huge relief for business owners. You (or someone on your staff) will have gone through the receipts for business expenses, ensured that all records are organized and stored, and double-checked all the figures before sending the documents to your state and the IRS. However, the thing about taxes is that they are never really done. It's easy to push off thoughts of next year's taxes, but taking a proactive stance to your upcoming tax season can be much more beneficial for your company.
How Automation Helps to Prepare Now for Next Tax Season
The first step to being proactive for next year's tax season is simple: Work on automating your tax record storage. Invest in a receipt scanner for the office so that all of the business expense receipts can be scanned and stored digitally (and preferably backed up on a physical hard drive stored off site and also in the cloud). Integrate those receipt records with your bookkeeping software, so that you can keep an eye on your deductions, as well as your liability.
Similarly, digital records of your sales and invoices can be stored and integrated with your bookkeeping software. By keeping these records up-to-date, you save yourself the frantic rush of trying to locate and organize all the necessary documentation come April of next year. You can also make it much easier for your business in the off chance that your taxes are selected for an audit. The peace of mind that comes from being adequately prepared for tax season cannot be overstated!
How Organization Helps Prepare Now for Next Tax Season
Have you implemented an internal practice of making sure that purchase orders, invoices, shipping notices, and payment records for each customer and order are filed together? If some of these records are physical, they should be scanned and filed together digitally. That way, you have clear documentation of your income, as well as a clear record of how the transaction was handled if a customer ever has a question or complaint.
Similarly, those files should be organized in a simple, straightforward manner that will be easy for anyone to navigate. Organizing files by year and then quarter, possibly even month depending on volume, may be the best bet. Other arrangement methods may be better, depending on how your business operates. Your filing system will be much different if you generally supply wholesale to a small number of companies as opposed to selling small batch retail orders directly to consumers. Whatever your business model and needs, take time to consider how to best organize your saved financial records so that they can be easily reviewed.
How Keeping Up on Tax Law Changes Helps Prepare for Next Tax Season
Perhaps one of the most onerous things about planning for next year's tax season is the fact that the IRS and many states adjust their income tax rules regularly. For example, in recent years, with the implementation of the Affordable Care Act, businesses were required to begin reporting on health insurance coverage, as individual employees are required to maintain health insurance policies. Changes in what is permitted for business expenses or similar write-offs could have a big impact on your tax liability if you don't realize as soon as possible that the change is occurring.
With so much information to keep straight, one of the best ways for your business to begin preparing now for next tax season is to consider hiring a professional outside tax accountant to prepare and file this current year's taxes. Consider this: If you or someone on your team are handling the accounting because your business is small or still growing, there is a big burden on their time and mental storage space to maintain all the knowledge and information for the business tax preparation, which takes away from their ability to solely focus on their primary job. This, in turn, can have an impact on your bottom line. It makes far more sense for you and your staff to focus your time and mental energy on the tasks to which you are all best suited, while outsourcing the complicated and time-consuming work of tax preparation to someone who has the education and experience to minimize your tax liability.
Right now is a great time to look into hiring an outside firm for taxes. After all, it is the off-season. Waiting until the last week in March to locate a tax preparation professional may result in your business paying a premium due to high demand during that time. Act now and save your company money and yourself unnecessary stress in the upcoming tax season.