Tax season follows the holidays, as sure as bells jingle and confetti flutters. The celebrations are delightful and just a little stressful, however doing taxes is just stressful.
To help small business owners minimize the pain of tax-time, Sam Brotman from CPAPracticeAdvisor.com has shared some good advice. These 4 tips are relevant to companies ranging from light manufacturing to digital entrepreneurs and more.
1. Prepare Year-Round
The best way to prevent an excruciating April is to spread the effort across the other 11 months. A key element here is keeping good records. Not only does this help ensure that everything is in order when the IRS deadline arrives, but it also makes it easier to take advantage of deductions. For example, one of the most common deductions is vehicle maintenance costs, which are simple to document when you have the receipts for the oil changes collected in one place. While receipts are an obvious item to gather, have you also been keeping a log of the vehicle use and travel destinations? Investopedia recommends these records, among others, for your tax preparations. When you're prepared with all the information, you can feel confident in telling the IRS what's what.
2. Stay Current on Legislation
While the IRS is the heavy hitter in April, state taxation can also be a challenge, especially since there are some crazy state tax laws on the books–we're looking at you, NYC. Are bagels really exempt from sales tax… unless someone else slices them open for you? Each year there are small changes to the tax rules in various states. But if you keep up on these kinds of adjustments, the curve-ball won't surprise you.
3. Leverage Tools and Expertise
Tip #2 brings up an important question though: Who has time to monitor all the legislatures that might impact your sales tax records? And this question is only growing in importance as e-commerce and online sales continue to be many consumers preferred shopping approach. There comes a point where a business owner has to admit that tracking receipts and tax laws isn't the best use of time. Fortunately, there are some excellent tools and reliable partners available. Taking advantage of these resources will enable you to focus your energies on strategies with the biggest ROI for your SME.
4. Beware the Most Common Pitfalls
While the previous guidelines will go a long way to help you keep your sanity during tax season, the final tips that Brotman writes about are foundational. The first warning is to not assume your tax professional will take on full responsibility for all aspects of your filing. Even the most expert help is only as good as the information you provide. Likewise, at the end of that tax form, it's going to be your name in the blank. Stay in touch with the tax preparation process so you can address challenges before they become crises. Brotman's second warning is basically to not let the IRS scare you away from benefits. If you have the documentation ready, then you should feel confident in claiming every available write-off.
To be candid, we all know that the tax season is still going to be a little stressful. There isn't a silver bullet that will solve all problems and make April as much fun as the other holidays. But armed with these guidelines, you'll be in a much better position to manage the stress and maybe even find something to celebrate–like the month of May.