In this week’s business tax segment, we want to spend a few minutes about talking about working with your tax advisor on preparing your business, and of course personal, taxes because in small businesses sometimes there’s very little difference between the business tax and individual tax.
Our founder is a CPA, but we’re am not in the business of preparing taxes anymore. Harvard Grace does not do that, but as independent CFOs for our clients, we work with their tax advisors. We work hand in hand to make sure that we get the best result for the clients, and that begins on January 1st of every year, not for the prior year but for that year. You have to prepare all year long to keep your records in such a way that it will be efficient to file your taxes the next year. If you have a plan, you’re also not missing deductions for things along the way. We mentioned an article (see above) about collaborating with your tech advisor that we thought we would share. Here are some of the key points:
You want to keep documentation. The article says keep your receipts handy. Your receipts seem to be more of an individual thing, but every business must have documentation, whether it’s a credit card receipt or an invoice, that goes along with every transaction, both income and deduction. If you’re using any sort of a modern accounting software, you can usually attach a digital copy of that documentation to the transaction, and then you don’t even have to worry about a filing cabinet. That leads me to the second point.
Use accounting software. They are generally cheap and easy to use with lots of training around. Quickbooks is the go-to. They probably have about 80-85% market share of small business accounting. There have been many others coming on strong in the last few years, such as Xero and EasyBooks. Using an accounting software like this will help with generating reports that both you and your tax preparer need. It’s also easy to change anything you may have booked wrong.
For record keeping, make sure if you bought any large pieces of equipment, or anything of that nature, keep all of that documentation, because when it does come time to file taxes, there might be special tax credits, or there might have been taxes already paid that you can get a credit for. That could be a car, a printing press, a large storage facility that you purchased.
Here’s something that most tech preparers do. They will send out an organizer. It’ll be organized information in a way that they need to see your data, and it’ll have last year’s data in there as a reference. Complete that for them and help them help you, because their time is not really supposed to be spent in putting numbers on a form. Many people can do that! You want your tax preparer to be thinking about the numbers that you’re doing in ways that will help you. Meet with them early in the year and throughout the year as things change.
Collaboration with your tax preparer will help you save money in the long run, so if there’s anything we can do to help you find a good collaborator, we’d love to talk with you. Reach out, book some time with us, and we’ll see what we can do together.