How small businesses can prepare for tax season - News-Credit-Mortgage-Coin

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Wednesday, February 17, 2021

How small businesses can prepare for tax season

 Here's what to do when your books are messed up


Summary

If you don't have taxes of your own, seek an accountant ASAP. Many will be almost full.

If you fear tax time, you are not alone. For many small business owners, the first few months of the year are an insane struggle to get their records and get them to an accountant on time. So what do you do if you've been keeping less-than-perfect books (or haven't kept them at all)?

How small businesses can prepare for tax season


It's not too late to make up for lost time.

Read all of the answers from our credit card experts.


Unless you collect your own taxes, it is important to hire an accountant with the bandwidth to collect your taxes for you as quickly as possible. Now is the time to get in touch as some accountants are already almost busy. Ask other small business owners in your industry for a recommendation.

Make sure you figure out what information your accountant needs so that you have time to gather it. If you need information such as a balance sheet or income statement, some accounting firms may have people available to help you clean up your books and prepare these documents. If not, you may need to find an accountant to help you as well.

If you need an accountant, ask your industry colleagues for a recommendation. Keep in mind that many small accounting firms tend to get the most out of it at this point in the year. Your best option, especially if you run a complex company or have employees, is to reach out to a company that has a team of accountants who can complement each other when something goes wrong. Bank is an example. QuickBooks also has a program called QuickBooks Live that can connect you to an accountant to get your books in shape.

If you've used a credit card that you've reserved for business purchases, make sure you collect any bank statements that you want to share with your accountant. Most credit card companies allow you to download PDFs of your invoices from their online portal. If you need to send them to your accountant or bookkeeper, using an encrypted email service can help keep your personal information safe.

If it looks like you can't get your books in order, ask your accountant to request an extension for you. That doesn't release you from paying your taxes on time - make sure you pay your estimates by the filing date - but your accountant will have more time to file them.

When you're done submitting, take stock of how you've done it this year. If you got into a last minute crisis, you probably need help with bookkeeping all year round. Many companies survived this year because of loans from the first two rounds of the coronavirus stimulus packages. In today's business environment, having good books is a competitive advantage. It is difficult to apply for short term loans if you haven't kept your books up to date and don't have accurate records to submit with your application.

Final thoughts

When you are on a tight budget, it is more cost effective to hire a professional accountant to handle your books than your accountant, who usually charges more per hour. Many accountants are so busy doing other chores that they would prefer to get a nice, clean set of books to work with anyway.

Also, make sure you are set up to keep as much of your business credit card and business account spending as possible. Attaching them to your accounting program allows you to automate some of your records, which reduces the number of hours you have to pay your accountant for.

Taxes may never be fun, but if you keep your financial records in shape, you'll be surprised how much less stressful February, March, and April can be.

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