By Sandra Finerghty, Supporting Strategies
Even the most competent, upstanding, conscientious business owners tend to fret over filing their taxes. And no wonder. Considering the legendary incomprehensibility of IRS regulations, who can blame business owners for feeling out of their league when trying to determine their tax obligations?
The result? They put off dealing with their taxes as long as possible. Which only compounds the worry.
Relax! You’ll Be Fine
Okay, so before we continue, take a deep breath. There’s no reason to panic. The first thing you need to realize is that you still have time to compile a comprehensive, clean-as-a-whistle tax return. If you have an S corp, partnership or multiple-member LLC, your filing deadline is mid-March, same as last year. (Technically, you get an extra day this year because March 15 falls on a Sunday, which bumps the deadline to March 16.) Otherwise, your filing deadline is the same as for most other Americans: April 15.
By the way, the IRS offers a detailed online calendar that lists not only annual filing deadlines but also things like semiweekly deadlines for deposit payroll taxes. But just looking at that calendar can induce a cold sweat because there are so many deadlines to keep track of, and only some of them apply to your business. Fortunately, there’s no reason to fret because …
You Don’t Have to Go It Alone
This is a good time to mention that the best thing you can do to alleviate your IRS anxiety, not only at tax time but all year long, is to enlist the help of an outsourced bookkeeping services provider. They can help you stay organized and keep you abreast of any new obligations, such as sales taxes, that might arise as your business evolves during the year.
It’s important to remember that tax regulations are fluid. Changes can be as straightforward as increasing the standard mileage deduction you may be entitled to from 54.5 cents per mile in tax year 2018 to 58 cents per mile for tax year 2019. Or they can be more complex and nuanced, like the changes to Form 8990 filings. (And those are by no means the only changes in IRS regulations that business owners need to be aware of this year.)
Having a trained professional keeping track of these changes can bring you peace of mind.
Of Course, You Still Need to Do Your Part
Even if you use a CPA to file your taxes and an outsourced bookkeeping services provider to keep your records in order and up to date, you still have to stay involved in the process at some level. Here’s a brief summary of good bookkeeping habits you should try to develop, beyond a basic awareness of your income and expenses:
- The monthly close: The best thing you can do to simplify and organize your tax records is to establish a solid, repeatable procedure for doing your monthly close. Once you make certain basic decisions, like choosing between cash accounting and accrual accounting, everything should fall into place. And if you keep up with your monthly close, compiling your year-end tax records should be easy and stress-free. Here again, an outsourced bookkeeping services professional, preferably one with a strong knowledge of automated software applications, can make all the difference.
- Quarterly payments: Same principle as establishing a routine for the monthly close: The more accurate and thorough you are in preparing your quarterly tax payments, the easier it is to prepare your year-end taxes. Also, quarterly tax filing deadlines are a good occasion to schedule things like inventory reviews.
- Deductions/amortizations: The tax deadline isn’t the time to determine which deductions you’re entitled to. You need to document those deductions all year long. You can’t claim mileage, for example, if you haven’t kept track. Fortunately, tracking mileage is much easier than it used to be, with a number of apps currently available. Some offer no-frills options for free, and most require little more effort than remembering to bring your smartphone with you when you travel.
- Personal vs. business expenses: This can be a tricky area for many small-business owners. Sometimes they use their personal credit card for business expenses, and their business credit card for personal expenses. It’s vital to keep the two separate. This is another instance when it helps to have an outsourced bookkeeping services provider watching out for you.
- W-9s and 1099s: As a business owner, you may be required to provide 1099 forms to your independent contractors and vendors every January. In order to do so, however, you have to have W-9 forms on file for those vendors and independent contractors. January is not the time to discover that you don’t have up-to-date W-9s. All the more reason to set up an automated year-round bookkeeping system with the help of a professional.
Look Forward to Less Stress Next Year
That anxious feeling you have about tax preparation doesn’t need to be an annual occurrence. As you prepare for this tax season, take the time to put into place the regular bookkeeping habits and processes that will help you feel prepared and relaxed during next year’s tax season.
Sandra Finerghty, Managing Director of Supporting Strategies | Durham & Chapel Hill, NC, provides outsourced bookkeeping services, controller services and operational support to growing businesses.