Being Prepared for Tax Season 

By Sherry Lutz Herrington 

As Benjamin Franklin said, “In this world, nothing is certain except death and taxes.”   For small business owners, taxes are often the thing that drives us to keep our accounting clean.  If we ever face an audit and can’t support what we’ve done, we can be fined huge penalties.  Not to mention the time and headache involved in going through an audit and trying to defend our record keeping. 

To try to prevent this pain and suffering, we must keep clean financial records and have taxes prepared correctly. 

Most business owners are savvy enough to know it is worth the expense to have their taxes prepared by a professional.  Whether that’s a Certified Public Accountant (CPA), an Enrolled Agent (EA) or another certified practitioner, doesn’t matter so much as the competence of the person.  Choosing someone knowledgeable and experienced who stays up to date on tax law is critical.   

The field of tax accounting is experiencing a severe shortage of new professionals entering the field and we are going to see the number of CPA’s dwindle as many are currently of retirement age.  Therefore, finding and establishing a good working relationship with a qualified tax accountant is imperative if you’re running a small business. 

Keep in mind, as this shortage grows, CPA’s will be able to pick and choose whom they work with and who they don’t.  We’re already seeing this happen.   

Therefore, you need to become their ideal client to ensure you will stay on their list. One way you can ensure that whomever you pick keeps you on as a client is to be prepared.  If you can provide clean financial reports to them on time, then it will be easier for them to prepare your taxes. 

The benefits are twofold; it’s easier for them to prepare your taxes, and it’s easier for you to run your business. 

What many small business owners fail to understand is that having clean financials is not just important for tax filing, it’s also tremendously helpful for operating your business throughout the year. 

Every year, I see a mad scramble of business owners who realize that their financial records are not clean enough for the CPA to use to complete their taxes.  That’s when they call frantically needing help with the accounting that culminates in clean financial reporting. 

I honor and respect anyone who recognizes it’s time to clean up the books.  It can be a frightening and embarrassing situation to admit that you need help with the day-to-day accounting.   

Without clean financial records, who knows how your tax professional can get you the best tax advantage. 

It all needs to start with the day-to-day bookkeeping.  Having clean books will go a long way to helping your CPA prepare your taxes and take advantage of as many tax savings as possible. 

What many business owners don’t understand is how valuable having clean financials monthly can be to their success. 

It’s easy to start a business.  Open a checking account, start selling your products or services, collect payments and you’re off. Right?  Well, not entirely.  You do need to keep clean records to pay those pesky taxes.  But you also need to know if you’re making money, how much, and if you can afford to pay yourself. Not to mention managing reinvesting in your products or services so you can always have something to sell. 

Unfortunately, bookkeeping is seen as something super simple that anyone can do for themselves.  And frequently, business owners believe this, so they do their best to set up the books and keep track of the daily ins and outs of their money.  What many fail to understand is that it’s not that simple.  Without proper training in accounting, you will not know what to do, much less how to do it.   

Handling the accounting of a small business is its own specialty that takes training and experience, which most small business owners do not have. 

Sometimes, it’s necessary to handle it yourself as the business owner until you can afford professional assistance.  If that’s the case, keep it simple and do your homework.  Get training and have someone qualified at least look over what you’re doing to be sure it’s correct. 

As your business grows, or if it’s got complex accounting to begin with, then hiring an accounting professional to oversee the bookkeeping will save you money in the long run.  Both by helping you manage and direct where your business is going, but also in having your financials clean and ready for your tax preparer on time. 

It’s a twofold situation.  You can’t build and grow a successful business if you don’t have clean, usable financial data to make decisions and guide you.  And you will save time and money on your taxes once the financial reports are ready for your CPA to use for tax preparation.  And as a bonus, you’ll be set up as your CPA’s ideal client, so you won’t end up high and dry with no tax professional when you need one. 

Being prepared for tax season starts long before January 1.  Having your accounting set up by a professional from the start is ideal.  If it’s past that point, then be sure you hire a qualified accounting professional to clean up the exiting books and establish proper day-to-day procedures.  You’ll find running your business less stressful, and you’ll be able to make strategic decisions on where to go and how to get there based on clean financial reports.  And then, when it’s time to turn the books over to your CPA, you’ll have a stress-free experience, and your tax preparer will be able to focus on getting you the best possible tax advantages. 

The sooner the better but it’s never too late.  Running a business is a taxing job so give yourself credit for all that you’re doing.  Once you have clean monthly financials you’ll have taken another huge step toward greater success. 

Leave a Comment