Tax season is a notoriously stressful time for business owners, especially those who don’t feel organized and confident in their bookkeeping. Fortunately, there are many proactive steps you can take now to ensure this tax season goes smoother than ever before. In part five of our 6-part series, we continue our exploration of how CPAs can assist businesses as outsourced financial service providers. Getting organized and seeking professional help can make small business tax preparation a breeze.
Feeling Confident at Tax Time
Confidence is usually not the word that comes to mind when most business owners think about how they feel during tax season. But in most cases, the bark is worse than the bite – Filing taxes is only scary when uncertainty and confusion cloud the process. Tax time is really a reflection of how you’ve been managing your finances throughout the year. Consistently keeping track of expenses and budgeting correctly all year leave you with little to worry about. With an accurate, systematic bookkeeping and accounting practice year-round, filing taxes becomes just as simple.
Of course, many small business owners are anything but disorganized. So when tax season comes around, they may be nervous for different reasons. Tax season involves a lot of technical rules and exceptions to those rules. Most people don’t have time to become financial experts to the extent needed to fully understand and stay up to date with these nuances, and even a money-smart CEO is bound to have some questions arise during the filing process. Because each organization is unique, different rules will apply, and a different course of action will be required in each situation.
How Business Owners Can Get Ahead of Tax Season
In just a few months, tax season will appear before you know it. Instead of procrastinating, take a proactive approach this year. A few things you can do weeks or even months in advance are:
- Organize paperwork – The most obvious way to get ready for tax season is to gather all your paperwork in one secure folder – either digital or physical. Your EIN, sales or services receipts, sales records, advertising expenses, and business account interest forms (1099-INT) are a good place to start. When it’s time to file, you’ll have nothing to do but open your tax folder or hand it over to your CPA.
- Consider your accounting software – One of the most valuable aspects of outsourced financial services is automatically gaining access to cutting-edge tax software. The bonus? You won’t even have to learn how to use it. Simply rely on your CPA’s expertise and let them scope out any potential tax credits for 2022. While small business owners frequently start out doing their own taxes with software like Quickbooks, many graduate to a professional accounting firm once they’ve grown and things have gotten more complicated.
- Consider any new income streams – One of the quickest ways to get yourself in hot water is forgetting to report all income. While being less thorough may seem convenient at the time, a surprise audit down the road won’t be.
- Look for tax credits – The IRS website lists tax credits for small business owners in various industries. While this is something an outsourced tax professional will help you with, you can always check ahead of time to see what’s available.
- Know the law – Many business owners make the mistake of assuming they don’t need tax knowledge. But even if you’re filing with a CPA, having a general understanding of tax laws as they apply to small businesses will help you throughout your business journey. A CPA will help fill the gaps in your knowledge.
- Itemize your expenses – Itemizing will save you a ton of time and hassle prior to tax day. Look at your expenses well in advance so you can skip the rush of paperwork right before April 15.
The Small Business Administration estimates that entrepreneurs pay an average of 19.8% of federal taxes annually. Small partnerships can expect to pay 23.6%, while small S corporations pay around 26.9%. For sole proprietorships, tax rates are always lower, with 13.3% being the average. Regardless of what type of small business you run, there’s no doubt that every bit of savings helps.
Outsourced Small Business Tax Preparation
Taxes are one of the most commonly outsourced tasks, but business owners sometimes wait too long to act. Scrambling at the last minute and leaving your paperwork with a big-box tax service provider doesn’t always yield the best results. It’s smarter to team up with a reputable CPA in your area who has gotten to know your business over months or years. This will make IRS audits less likely and may even cut your tax bill significantly.
Outsourcing small business tax preparation to a reputable CPA will ensure:
- Tax estimates are correctly calculated so you can know ahead what you’ll owe
- Federal, state, and other returns are handled from start to finish
- Your tax credit and growth opportunities are maximized
- Your tax burdens and risks are minimized
- You are in compliance with the law and any industry regulations
Companies operating in multiple states can get specialized help from a small business CPA, and other special circumstances can be addressed, like estate and gift planning. A CPA can help you assess and improve accounting methods or evaluate different strategies based on entity structure. Whatever your specific situation, a qualified CPA will know what to do.
From bookkeeping and accounts to the final tax submission, BradyRenner handles everything so CEOs can spend tax season focused on more important matters – like running their business. If you are looking to outsource tax prep for small businesses in the Maryland area, give us a call today. Now is the perfect time to start prepping for tax season, looking ahead to the new fiscal year, and getting clear on your goals.