Published: Friday, January 22, 2010
How small businesses can prepare for tax season
For some small business owners, income tax filing season feels like a slow-motion train wreck.
These are often owners who tend to be disorganized and unable to keep good records. Instead of keeping their companies’ books with a small business accounting program, they use a stack of overstuffed file folders or worse, boxes and shopping bags. They often end up spending hundreds of extra dollars paying their accountants to sort through the whole mess — provided the accountants will even agree to deal with it.
There’s another group of owners who end up in trouble at tax time. They haven’t been paying attention to things like letters from the IRS or state tax authorities. Or they don’t stay on top of filing deadlines. They don’t listen to the advice of their accountants. Tax season can turn out to be full of unpleasant and costly surprises.
These owners still have time to avoid a train wreck. And also avoid being in a similar situation a year from now.
Get organized
Tax time is pretty easy for small business owners who use accounting software to keep the books. At some point early in the year, they just e-mail records for the previous year to their accountants or tax preparers.
For the disorganized, the season can be torturous as they sort through piles of receipts, checks, credit card statements and invoices. It can also be extremely expensive if they hand the mess over to a CPA who’ll charge several hundreds of dollars an hour to clean it up.
Mark Toolan, a certified public accountant in Exton, Pa., has advice that starts with: “Grab hold of yourself.” Then invest in some small business accounting software and input the information from all those bits of paper.
Do that and you’ll be able to file your taxes on time and with a lot less stress, and set yourself up for an easier time next year.
Another option is to hire a bookkeeper. Or, as John Evans, a partner with the accounting firm BDO Seidman in New York, suggests, take on an intern, perhaps an accounting student from a local college.
And if you don’t have books, ask your new assistant to create a ledger. It doesn’t have to involve accounting software, Evans said.
“Have them set up a little record system,” he said, adding that putting all your expenses on one credit card can be a start.
There are more reasons for being organized than avoiding tax-time hassles. Most important is the fact that the more haphazard you are, the less of a handle you have on your company’s finances. And, in turn, the greater your chances of finding out one day your company is in trouble.
Read your mail
The return address starts with Internal Revenue Service. Or something like New York State Department of Taxation and Finance.
Toolan says many small business owners never even open the envelopes. They put the letters aside and at tax time, hand them to their CPAs.
It sounds obvious, right, open your mail? But not everyone does it, and in the process owners miss notices about mistakes on a tax return, questions about employment taxes or actual bills for taxes. Not addressed, those issues can lead to late payment penalties and interest.
“Don’t wait until a year later and say, this is 12 months of correspondence” when you visit your tax preparer, Toolan said.
Joyce Rosenberg writes about small business issues for the Associated Press.
These are often owners who tend to be disorganized and unable to keep good records. Instead of keeping their companies’ books with a small business accounting program, they use a stack of overstuffed file folders or worse, boxes and shopping bags. They often end up spending hundreds of extra dollars paying their accountants to sort through the whole mess — provided the accountants will even agree to deal with it.
There’s another group of owners who end up in trouble at tax time. They haven’t been paying attention to things like letters from the IRS or state tax authorities. Or they don’t stay on top of filing deadlines. They don’t listen to the advice of their accountants. Tax season can turn out to be full of unpleasant and costly surprises.
These owners still have time to avoid a train wreck. And also avoid being in a similar situation a year from now.
Get organized
Tax time is pretty easy for small business owners who use accounting software to keep the books. At some point early in the year, they just e-mail records for the previous year to their accountants or tax preparers.
For the disorganized, the season can be torturous as they sort through piles of receipts, checks, credit card statements and invoices. It can also be extremely expensive if they hand the mess over to a CPA who’ll charge several hundreds of dollars an hour to clean it up.
Mark Toolan, a certified public accountant in Exton, Pa., has advice that starts with: “Grab hold of yourself.” Then invest in some small business accounting software and input the information from all those bits of paper.
Do that and you’ll be able to file your taxes on time and with a lot less stress, and set yourself up for an easier time next year.
Another option is to hire a bookkeeper. Or, as John Evans, a partner with the accounting firm BDO Seidman in New York, suggests, take on an intern, perhaps an accounting student from a local college.
And if you don’t have books, ask your new assistant to create a ledger. It doesn’t have to involve accounting software, Evans said.
“Have them set up a little record system,” he said, adding that putting all your expenses on one credit card can be a start.
There are more reasons for being organized than avoiding tax-time hassles. Most important is the fact that the more haphazard you are, the less of a handle you have on your company’s finances. And, in turn, the greater your chances of finding out one day your company is in trouble.
Read your mail
The return address starts with Internal Revenue Service. Or something like New York State Department of Taxation and Finance.
Toolan says many small business owners never even open the envelopes. They put the letters aside and at tax time, hand them to their CPAs.
It sounds obvious, right, open your mail? But not everyone does it, and in the process owners miss notices about mistakes on a tax return, questions about employment taxes or actual bills for taxes. Not addressed, those issues can lead to late payment penalties and interest.
“Don’t wait until a year later and say, this is 12 months of correspondence” when you visit your tax preparer, Toolan said.
Joyce Rosenberg writes about small business issues for the Associated Press.
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