TaxSlayer performed a Tax IQ survey for tax preparation attitudes and perceived tax preparation abilities by Americans, and some interesting results came out of it. 28% of individuals would rather go without a cell phone or car for a week instead of having to face the task of tax preparation. 53% have no confidence in their ability to complete tax forms without professional help.
Business owners have an even less favorable view of the process. This is expected, considering that businesses have more financial sheets, 1099 forms, income sources, expenses, and deduction rules than individuals. The two largest concerns are not having all financial reports up to date and not having completed the prior year tax financial records, essential to filing the current year reports. The mindset often pursues the idea of handing all of the papers to a tax professional to let them work their magic and miraculously prepare accurate returns.
Developing a Cost-Effective Tax Plan from the Beginning
The tax process does not have to be so intimidating. Consulting bookkeeping and tax professionals from day one can ensure that your financial data is always up-to-date. This not only makes tax preparation a breeze, saving expensive costs, but provides up-to-date financial reports for creditors and investors. Professionals can set your business up with software for in-house bookkeeping. These include Excel, Quickbooks accounting software, Peachtree financial software, or a reputable bookkeeping service to perform daily, weekly, or monthly updates as business needs dictate. One advantage is that tax preparers can prepare regular estimates, allowing business owners to budget for taxes due as the year progresses. If your business is involved in flipping real estate properties for profit, you may want to consider consulting an agency like Anderson Advisors for their expertise regarding Capital Gains Tax.
Benefits of Using Tax Planners for Small Business
One of the benefits of using a tax planner is that you are ready to go at tax time, instead of playing the costly catch-up game. Businesses need to keep employee pay records and employment tax payments as the year progresses. Keeping accounting journals up to date is equally as important. Plus, having tax professionals in your corner reduces the likelihood of an audit and gives you reliable support before any taxing agency. Tax attorneys, Certified Public Accountants (CPA’s), and certified Enrolled Agents, who are approved by the IRS, are qualified agents to assist in your tax and accounting processes.
Following proper accounting procedures will help avoid unnecessary audits. Here are a few other recommendations for avoiding an audit:
- Check and re-check your numbers. Filing amended returns often triggers an audit.
- Reporting losses for 5 or more years may indicate an audit is required to differentiate a hobby from a business.
- Maintain accurate, detailed records including all receipts.
- Don’t overstate expenses or intentionally understate income. Do not round numbers as these are indicative of manufactured numbers.
- Take legitimate deductions. This is especially true of following rules for deduction of home use for a business.
- Follow the rules for independent contractors. The IRS has very specific guidelines.
There are guidelines for finding a qualified record keeping and tax planner for your small business. For many of your records, particularly for one-man, home-based businesses, Inc. recommends you, the owner, as the best source for record keeping. With Excel spreadsheets and Quickbooks for small business, the process is simplified. Though many people do not think they are qualified, many training videos and classes are offered to get anyone started. As the business grows, employees may be added to take over this business function. An hour or two at the end of each workday will keep records accurate and up-to-date.
A good practice is to have a tax professional do a routine quarterly review of your records. A good tax professional will review your records and should pay attention to deductions you are not taking. Oftentimes, small business owners err in the favor of the IRS for fear of an audit. Qualified professionals familiar with your business should check for routine expected deductions and question backup receipts for unexpected deductions. Organizations like the National Association of Tax Professionals are great places to find qualified professionals to work with your business.