Whether it’s gathering financial documents or researching regulations, having all the information you need at hand will make the tax prep process easier. Further, establishing smart habits throughout the year can make “crunch time” go much more smoothly. Below, a panel of Forbes Finance Council experts shares some essential steps small-business owners should take well before tax day.
1. Finalize Calendar Year Reporting ASAP
Most importantly, small-business owners should prioritize finalizing calendar year annual reporting as soon as possible. This gives you a head start and a clear understanding of what your expenses were the previous year. Additionally, implementing digital automation to streamline manual processes can provide significant operational support in preparation for tax day. – Omar Choucair, Trintech
2. Track Receipts And Expenses Throughout The Year
You may want to simplify your taxes and maximize your deductions. Check your records first. You should keep track of receipts and expenses throughout the year so you can just pull them out at tax time. Sit down with your accountant or another professional once you have everything and talk about which deductions apply to which situations and how much you could save if you claimed them correctly. – Neil Anders, Trusted Rate, Inc.
3. Review New Tax Legislation
Preparing for tax day can be intimidating for small-business owners, especially for new entrepreneurs. One essential item on your tax-preparation checklist should be to review new tax legislation and changes. It’s particularly important for small-business owners to review allowable deductions for their business type, as they could save a lot of money if they qualify with proper documentation. – Luz Urrutia, Accion Opportunity Fund
4. Schedule Tax Prep And Strategy Meetings With Your CPAs Well Ahead Of Time
Check in with your CPA firm well ahead of time to make sure they have all of the documents and access that they need to prepare your return (bank account statements and so on). Depending on the complexity of your business, you may also want to set a meeting with your CPA to discuss tax strategy so there aren’t any surprises. – Andrew Kerai, Capital Ideas Inc.
5. Stay On Top Of Tax Projections Throughout The Year
Did things go according to plan? Taxes shouldn’t be a surprise. Entrepreneurs who consistently stay on top of tax projections throughout the year can plan for the best options. Entrepreneurs who wait until tax season to discover how much they owe often deal with unpleasant outcomes. Tax planning isn’t something you do in tax season. It’s something you do long before taxes are due. – Todd Sixt, Strait & Sound Wealth Management LLC
6. Have Deductions And Expenses In Order
Make sure that all deductions and business expenses are in order. Thankfully, there are many tax deductions that business owners can take advantage of, from business supplies to software. By outlining all qualifying deductions, business owners can save a hefty amount of money come tax time. – Jared Weitz, United Capital Source Inc.
7. Set Up Quarterly Meetings With A Tax Advisor
Calculate and plan for the last tax payment due for the corporation and shareholders. Then, set up quarterly meetings for review with your tax advisor for the current year, and keep them. Sometimes we have to pivot, and these meetings keep us on track with both internal reporting deadlines and planning for business changes throughout the year. – Cynthia Hemingway, Fourlane, Inc.
8. Understand Your Business’ Specific Tax Requirements
Small-business owners face varying tax requirements based on their situations and should ensure they have the correct forms and know their deadlines. For example, an S corp must file a Form 1120-S by March 15, sole proprietors must file a Schedule C by April 18 and those with income from online transactions may get a 1099-K. Nonprofit small-business centers are a great resource for help with navigating tax requirements. – Carolina Martinez, CAMEO
9. Ensure Your Accountant Has Full Visibility Into The Business
Two or three months before tax season is an excellent time for small-business owners to engage with their accountants. An accountant needs access to a business’ full financial picture. By equipping them with good visibility into the business, owners can understand how to lock in all possible deductions to create a solid plan for investment and revenue growth for their business in the following year. – Eyal Lifshitz, BlueVine
10. Get Clear On Your Filing Deadlines
It’s crucial that you know your tax filing deadlines. Businesses that have switched to an S corp or set up a new partnership often forget that their deadline is a month sooner than the deadline for personal taxes or a single-member LLC. Forgetting or being ignorant of this can cost you a great deal in failure-to-file penalties. Start asking your tax pro now what the deadlines are for your business. – Kale Goodman, Easier Accounting
11. Check Cash Flow And Tax Liabilities Each Month
I believe you should always be improving systems and processes. Bookkeeping and accounting are some of the most important systems for keeping a business healthy. Set monthly meetings with either your staff or third-party providers to check your progress on cash flow and tax liabilities to stay up to date. – Brian Gramlich, Terrydale Capital
12. Gather And Organize All The Needed Documents
One essential checklist item is to ensure you have all the necessary documents and information. This includes gathering income statements, receipts and invoices, as well as other financial documents. It’s also important to ensure these records are organized properly so that they can be easily accessed and understood. Preparing ahead of time will help ensure a smooth and stress-free tax season! – Angelo Ciaramello, The Funded Trader
13. Make Sure You Have Sufficient Cash On Hand
It may sound obvious, but make sure you have the money to pay your taxes. Make sure you include an estimate of taxes owed before you do a cash flow forecast, especially if you are trying to determine how much cash is available for one-time payments such as a bonus pool. Don’t spend the money early and then be exposed to a tax bill you can’t fund. – Aaron Spool, Eventus Advisory Group, LLC
14. Don’t Wait To Get Started
Don’t leave it until the last minute. Many business owners are guilty of this, and as a consequence, they leave money on the table. Estimate your taxes early, understand the deductions in good time (there were some new ones in 2021 and 2022) and put the cash aside. Fines are expensive! – Sameer Gulati, ZenBusiness