What if you could avoid tax surprises?
If you’ve ever had to gasp when you find out the amount of tax due when filing your tax return, you know what it feels like to have a tax surprise. From a pit-in-the-stomach feeling to the worry about how you will come up with the amount of tax owing, entrepreneurs can often face surprises.
I have good news! These nasty tax surprises are completely avoidable, and it begins with good tax planning, particularly tax planning in the fall. The problem is that many business owners don’t know how to go through a good tax-planning process, so we’ve listed the five steps below.
The five steps to good tax-planning:
Step One: Have your bookkeeping and accounting records up-to-date and clean. The only way tax planning can be helpful is if your current numbers are accurate. If you or your bookkeeper have fallen behind on bookkeeping tasks or if you’re not sure the transactions have been recorded correctly, a trusted bookkeeper or accountant can review the books and provide guidance.
Step Two: Review both the balance sheet and income statement to see if they make sense. That might sound like a big task, but if you’re working with someone who knows how to help you understand your numbers, the task really isn’t tough.
Step Three: Estimate your income and expenses for the remainder of the year. This means you’ll want to think about what you expect for both revenue and expenses. If you aren’t sure what to project for the remainder of the year, you can always fun both “best case” and “worst case” scenarios.
Step Four: Share the clean financial information and projections with your tax preparer and ask for an estimate of taxes owing based on the numbers. A good bookkeeper or accountant can often save time by communicating directly with your tax preparer.
Step Five: Ask for advice to see if there are things you should do to help save taxes. The most common ways to save taxes are to consider if you need to buy some equipment or a business vehicle, start a retirement plan for employees, pay out employee/owner bonuses, or put money into your own retirement.
While these steps can be rather overwhelming if you haven’t been through the process before, there’s no need to worry. We can help with clean-up of your books and lead you through the process. If you want to avoid tax surprises, it’s definitely worth the effort to be proactive about your taxes so you avoid a big tax surprise.
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