Tax Time

Tax day is just around the corner and it is common for folks to struggle with getting their taxes done. There is nothing we can do about the past, but there are changes you can make now to make future tax days go smoothly and be less burdensome on everyone’s time. Here are five things you can do this year to stay on top of tax prep.

1. Consistent data entry – Whether you use accounting software or pencil and paper, make it a habit to do financial record keeping. Working on this monthly, to match your bank statement cycles, is an absolute minimum. But weekly would be better. Depending on the business, it actually should be done daily. It is very easy to forget about regular data entry and just let the year slip by, this results in a big ugly project on your hands. Having a good habit of financial record keeping will also help tax planning during the second half of the year.
2. Organize supporting documents – Make a folder for bank statements and receipts, capital purchases, livestock sales and purchases, etc. There will always be questions on some of the transactions, so having a central location to dig up papers will save time in the future.
3. Be a pleasant customer – Show up to your accountant’s office early with a smile and a box of donuts (or a six pack of beer!?), and pay your bills on time. A friendly attitude goes a long way.
4. Understanding extensions are okay – Nobody wants to extend, and your lender is waiting to renew your operating loan, so I understand the pressure. However, let’s look at the calendar for an accounting firm. January is spent processing 1099’s and payroll reports. Then all that stuff has to circulate through the mail to you and back to your tax preparer. Even if you get those tax documents and perfect financial records to their office by February 15th, that leaves two months to complete everything for all their customers. Two months to have a perfect completion record is a tall order to ask of any firm in any industry. Once it is extended, just be careful not to miss the six-month deadline. It is easy to procrastinate and let that second deadline sneak up on you.
5. Embrace learning – You don’t have to be a tax expert, but have general knowledge of what forms are included on your return, and how the cash records line up with the tax return. I still do a handful of income tax returns for several reasons, but the main one is to stay sharp on tax knowledge. Continuing education is critical for everyone. Staying up to date on tax regulations helps in my teaching roles allowing me to know how the economics, finances and taxes are all related.

In my opinion, finances are fun! Most might not agree with that statement, but I will argue that knowing your financial situation will help your business. More importantly, it will help facilitate quality discussions with your business partners (most likely your spouse!). If you struggle to meet the consistent data entry tasks, consider outsourcing that project. Just remember to clearly communicate with whoever is doing the books. Outsourcing is not pawning off the project then complaining about the results later, or doing absolutely nothing with that data. If your taxes are done already this year, thank your tax preparer for their hard work! If your taxes aren’t done this year, ask yourself what you could have done better to help your tax preparer with the process.