It’s that time of year again – TAX TIME!
And guess what? I’ve been working with clients who have been turning in their numbers to their tax accountants starting the middle of January!
If you’re someone who dreads January, February, March – and beyond – because those months seem to turn into “Franken-tax” time, you may be asking yourself: “How do they do it? What would it be like if I was ALL DONE with tax-related chores by the middle or end of January?”
If so, here are some “Tylenol Tips” to help you lay out a plan to move into pain-free mode as soon as possible!
AVOID Tax Surprises – Be Able to Predict Your Annual Tax Bill
Unanticipated tax bills can be a very painful surprise! A far better alternative is to use the following steps to (roughly) anticipate your tax costs as you progress through the year.
1. Make your “estimated tax payments” suggested by your tax advisor as of the dates indicated.
These payments have been computed based on your prior-year tax cost and minimum amounts due to avoid penalties. Note: Those amounts may, or may NOT, be enough to cover all of your taxes for the current year!
2. Keep ALL of your entries into QuickBooks up to date.
This means daily, weekly, or (at the very least) monthly data entry. (If you need help learning how to do this, check out these online QuickBooks training classes.)
3. Perform month-end closing procedures to be sure that your reports are accurate.
4. Create a realistic, account-based budget for your company.
5. Ask your tax advisor to estimate your various upcoming tax costs if you meet your current-year estimated income projections.
6. Compare your actual year-to-date results against the budget on a regular schedule (e.g., at the end of each month or quarter).
Are you ahead of planned income? Are you behind? If you are significantly “off base,” it’s time to request a new tax projection.
TIP: The extra income that generates higher tax requirements can quickly disappear. It may be extremely difficult to unearth the money when “the tax-man” shows up! It’s a good idea to either remit more as you go or to set aside those extra funding requirements right away. (If you DON’T want to immediately remit to the government you could set up a separate “Tax Savings” account. It won’t cost much and can help to earmark money that’s not to be spent elsewhere.)
Get the “Ball Rolling” Sooner!
7. Be sure to reach out to your tax advisors in November or early December. The one thing you DON’T want to hear in January or February from your tax person is:
“Gosh Pat, I wish you would have contacted me last November. I could have saved you a boatload of money! Of course, now that we’re past the end of the year, there’s nothing I can really do about this…”
Tax laws change, and your company changes, so you need to set a time to review your current year’s results. They may be able to provide some new tax-saving strategies.
8. Create a checklist or add these steps to your calendar.
o Given what you know about YOUR company, you may want to add these steps into your monthly checklists or add them as reminders to your calendar.
o NOTE: This is the type of information we share in our Construction Accounting & Management Program (CAMP). If you want to begin using QuickBooks to its full potential, or if you want to become smarter, better, and faster with QuickBooks, I invite you to check it out!
Three MORE Ways to Take The Pain and Suffering Out of Tax Time
Of course, one of your primary goals should be to create a clean, reliable, useful set of management and job-cost reports every month. When you’re running this tight accounting ship, you’ll also see extra tax-time benefits. Each of these will make your tax-related life so much easier, and ease the stress that so many bookkeepers and company owners face at this time of the year.
If you’re not already there, take a few moments to imagine how the following environment would feel to you:
9. The year-end nightmare will disappear.
Relax. Take a deep breath. An orderly, recurring, monthly process means that year-end, from your side, has become sooooo much easier and simpler…
10. Your information will be ready to hand off to your tax preparers before (almost) everyone else.
This means that your return won’t be stranded in “perpetual tax extension hell.” No more tax returns hanging – and hanging – and hanging – waiting to be addressed.
11. You will know your actual TAX and annual company results sooner.
With a cleaner year-end close, and your taxes are finished (likely in February or March! Woohoo!), you’ll be able to ask your tax preparers to provide you with any prior-year adjusting entries. After you (or they) make the entries, you’ll be able to see your true, FINAL results for the prior year. Breathe a deep sigh of relief! It’s done!
There you have it – a total of eleven ways to take the pain and suffering out of tax time…
How Does This Apply to You?
• Are you a bookkeeper who’s tired of feeling under-trained and overwhelmed?
• Are you a company owner who wants to know more about your company’s financial results on a day-to-day basis? Are you tired of having to wait until next August or September to see how last year turned out? And how much do you owe in taxes?
• Are you a tax preparer who wishes (especially at tax time!) that your clients would provide you with a nice, tidy, well-organized set of results? Are you tired of getting QuickBooks files that leave you wondering what your client did? And how long it’s going to take to convert those numbers into a workable format?
At Info Plus Accounting our mission is to help small and mid-sized businesses learn how to:
• Structure their internal accounting and control systems.
• Enter, check, and understand their numbers to yield.
• Reliable, timely, and useful management information throughout the year.
We believe that owners and managers should be able to use this data to run more efficient, effective, and profitable companies.
We have developed support tools designed especially for companies within the construction industry. As previously mentioned, one of our most popular programs is the Construction Accounting & Management Program (CAMP). If your needs match up with our mission, we believe you’ll find this online training program to be of exceptional value!
Moreover, you’ll find that tax time immediately becomes far less stressful for owners, bookkeepers, and tax professionals!