Tax season has a way of sneaking up on even the most organized among us. And if you are new to filing as an LLC or other type of small business, trying to get all of your ducks in a row can be incredibly overwhelming. Here is a checklist to help you make sure that you are prepared to file your taxes before the deadline passes you by.
Be Objective About Your Size
At some point (hopefully) your solo enterprise turned into a much bigger endeavor. And with that change, though you might not want to admit it, came the outgrowing of your tax bracket. If you are running a large business, you should not be attempting to file your taxes the same way you did in the early stages of your company. This is especially true once you take on employees. At that point, taxes are no longer a DiY project and it’s time to hire tax professionals to help you with your tax compliance and the administration of your payroll, benefits, etc.
Hiring the Pros
Even if you are still a solo freelancer, hiring a professional accountant or bookkeeper to help you with your taxes is probably a good idea. Pretty much the only professionals who do not need outside help with this are people who are trained as accountants, book keepers, finance experts, etc. And no, DiY tax software isn’t the same as hiring a pro. Check out the local tax pros and accountants in your area. Delegating this tax will not just take the job of managing your books off of your hands, it will reduce your stress because you won’t have to worry that you are creating errors or triggering an audit.
Track Your Details
There are literally dozens of different ways that you can track your details–the money your company has coming in, going out, where it goes, etc. If you’re just starting out you can easily do this yourself using a simple spreadsheet in Google Docs. As your company grows and brings in bigger profits, however, you will need a better solution. There are plenty of fantastic apps and software packages out there that will help you with this. Harvest is a good option, as is Freshbooks. Intuit offers Quickbooks for a monthly fee. Whatever you choose, make sure that it is syncable across devices so that when, for example, your assistant scans in a receipt for reimbursement it shows up on the company’s account and syncs across all of your devices so that you will have up to the minute knowledge of exactly how cash flows into and through your company.
Gather Those Details
When you were a kid, you probably remember your parents keeping their receipts in boxes, bags, in drawers, etc and then trying to go through them all at tax time without getting into a fight. Keeping and recording your receipts is incredibly important for business owners and managers as well. It is important to not just keep track of the physical receipts but to keep digital copies of them as well. This way, when you come up with a blank piece of paper because the merchant used evaporative ink, you’ll still have a copy on hand.
On each receipt write the details of the expense: what was bought, by whom, what for, etc.
Mind Your Details
This goes back to our earlier suggestion that you hire a professional to manage your taxes and accounting. There are dozens of different seemingly tiny mistakes that you can make when you file your taxes that can get you into trouble when it is time to file (or afterwards). Make sure you understand the tax forms and regulations surrounding businesses and money flow of your kind. These will change from year to year and from bracket to bracket so it’s worth going over the details every year during the fourth quarter (aka right now).
If You Get Audited
Nobody wants to get audited and the normal reaction to being served with a notice of audit is to panic. Give yourself a day or so to freak out and then get to work. It is possible to prepare for your audit just like you prepared when filing your taxes. More than anything else remember that the auditor you’ll be working with wants your taxes to be correct as much as you do. And try to be kind to this person as she is just doing her job. Cooperate, be professional, etc.
Tax time can become overwhelming even for the most seasoned business owner out there. Hiring a professional is a great way to calm down that feeling of rising panic. If you do choose to go it alone, however, use the tips we’ve shared here to make the process as smooth as possible.