Tax season can be a stressful time of year for business owners. Confusion over their tax requirements, stress about having the cash flow to pay tax bills, and frustration with attempts to catalog business records for accountants can all create many obstacles to navigate. Much of the stress associated with tax season can be reduced by pre-tax season planning so that when tax season comes around, business owners can file correctly without scrambling at the last minute or facing the consequences of missteps.
Review Tax Requirements
Between changing tax legislation, balancing state and federal tax requirements, and taking into account specific business configurations, it can take time to ensure everything is in order for tax season. Business owners can reduce confusion and filing errors by taking time to educate themselves about changes in tax legislation that are relevant to their business before working on filing their taxes.
When reviewing tax legislation, some areas to focus on are tax filing dates, eligible business deductions and their requirements, documentation needed for employees along with relevant deadlines, and a general assessment of the types of taxes that the business will be liable for. Keep in mind that changes in tax law may not be the only reason behind changes in tax requirements. As a business grows, there may be additional taxes and filing requirements that need to be met.
Organize Business Records
In general, it is a best practice to keep business and personal records separate and to keep track of business records throughout the year. Has business record-keeping become a bit lax throughout the year? Perhaps being organized with business records is an ongoing challenge. Dedicating time to work on tidying up business records can make filing taxes way less stressful and time-consuming when filing deadlines are approaching. Business owners can start organizing their business records by determining everything they need to file their taxes. If additional clarity is needed about their documentation needs, they can reach out to a tax professional or do additional research on their unique business needs. Organizing both paper and digital business records and potentially building a system to handle these documents over the coming year can ensure that the business is prepared with any documentation in case of an audit. Additionally, organizing business records can save money in taxes by making it easier to determine what deductions the company may be eligible for and how much those deductions should be.
Plan for Tax Professional and Software Needs
Before tax season starts, it is helpful to have a strategy for filing. Whether the plan is to use tax software or to work with a bookkeeper or accountant, determining a plan in advance can ensure there is time to find the best option for both the structure of the business and the preferences of the business owner.
Business owners who are filing their taxes on their own can take some time to ensure they feel comfortable with the software they plan to use and determine if they need additional resources to manage the filing process. If a business owner determines they need the assistance of a tax professional, preparing early gives time to find a suitable professional, learn the process of working with that professional, and provide any documentation they may need.
For business owners with an established relationship with their tax preparation team, planning to meet to discuss tax strategy can maximize the benefits of working with a tax expert. Additionally, planning meetings with a business owner’s tax preparation team can create a smoother process of providing documentation, provide time to inform the team of relevant changes to the business so they can prepare accordingly, and ensure that everyone understands their role and responsibilities in the tax filing process.
Set Aside Funds for Tax Liabilities
Preparing for tax season can also include the crucial step of understanding the types of taxes a business may be subject to and working toward setting aside the funds to pay these liabilities. Organizing business records and keeping track of tax payments means that there will be fewer surprises at tax time. Understanding the business’ estimated tax liabilities can create continuity in a business’s cash flow when tax payments need to be made. An organizational best practice is to create a separate account to hold funds set aside for tax payments so that they are not accidentally utilized for other business expenses.
Planning Can Be Self-Care
Business owners have a multitude of responsibilities and stressors. Disorganization and finding last-minute solutions to tax conundrums can add to the pressure that business owners face. Planning for tax season is not only helpful for the business but also can be a vital self-care activity for business owners. Although this form of self-care may be a bit tedious and less exciting than other well-being practices, taking steps to make tax season more bearable can be a sanity-saving activity.
