3 Reasons You Should Prep For Tax Season Today (And How To Start)

By on December 1, 2014
small business tax preparation

April 15th is the widely dreaded U.S. tax date for most Americans who must file their personal tax returns. As a business, you have the flexibility of choosing when you’ll need your accounting cycle to end (so long as it coincides with the end of a quarter) and will have just 30-day after the cycle closes out to file your business tax returns or to request an extension without facing fines and penalties from the Internal Revenue Service (IRS).

It’s not even the end of the year, why should you be worried about the April 2015 tax season now? There are some compelling reasons that you should prep for tax season today. By getting your business affairs in order now, you can proactively plan for tax season and skip the stress of April. Many wait to file their business or personal tax returns until late in the spring, when your accountant is overwhelmed, attention is hard to get and it’s too late to make any adjustments to 2014.

So here are three reasons you should prep for 2015’s tax season today.

1. Get Your Books In Order

As a small business you should already have a great bookkeeper that keeps your daily and monthly financials in order for you, but syncing up your books with your accountant is something you should do more often than just tax time. If you haven’t already had your accountant review your bookkeeping for this year, you should do is now to get an overview of where you’re at for 2014. An accountant will be able to identify if there are any errors or mistakes in your books and help you bookkeeper with figuring out if there are any outstanding big invoices, or outstanding big purchases that should be made or pushed off (see more about that point later on number three of this list). During the year there are a lot of ways your books can get out of whack. Did you miss a payroll tax cycle or fall short of your tax contributions? Are there outstanding invoices sitting on your accounts receivable records or are you guilty of having outstanding expenses on the accounts payable side? What about work that you need to invoice for but haven’t yet? Having your bookkeeper meet up with your accountant is a great way to get your books in order before you have to start thinking about closing out the year.

2. Figure Out What You Owe

While all the expenses for the year probably haven’t hit your books just yet, now is a great time to get your accountant to help you run a preliminary look at your tax situation. Running a small business is subject to some complex tax laws and you’ll want to know ahead of time what you’re likely to owe in April when its time to file (or whenever your accounting year end cycle is going to hit if you aren’t on the calendar year cycle). By anticipating what your expenses are now, you’ll be able to better plan if you need to set aside money for the future tax payout that’s coming. If you’re not on a calendar year cycle and taxes will be coming up sooner than April, now is a great time to figure that out so if necessary, you can have your accountant file an extension for your filing to allow you the time to get your finances in order to bear the brunt of tax season when you can handle the expense. For many small businesses that are highly seasonal, it may make sense to pay the fee for a filing extension to sync up tax time with your more profitable cycles of business so you can afford the tax costs that come and the higher accounting costs for filing.

3. Take Action Before Year-end

As a small business, there are large expenses that you have to plan financially for during your accounting cycles. This is one of the key reasons to keep a professional accountant, aside from help with your taxes; a good accountant will help you anticipate and plan for big expenses like equipment, offices moves, new corporate vehicles, etc. There are a lot of times where making a big expense makes sense in the current accounting cycle, and other times when waiting will make more sense. If you have uncharacteristically high revenues in the current financial calendar year, your accountant may advice you to make your large tax-deductible or depreciating purchases now to help offset your tax burden in the current year. At other times it might make more sense to wait to try to save those purchases toward another tax time when you’ll benefit more from the tax deduction of the purchase. This can also go for making new hires or adding new staff positions to your business. Make sure you are running all big purchase or employment expenses you anticipate by your accountant first; it might make a lot of sense, and save you a lot of money to make those purchases at a different time.

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Adam Toren

About Adam Toren

Adam Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Matthew. Adam is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.