Tax Planning: 10 Ways to Get Organized for Next Tax Season
Tax planning is a very important part of every business. Now that this tax season has ended, how can you get back on track and be sure you’re ready for the next tax season? The following ten tips should be useful whether you’re an obsessive planner or you need an easy-to-follow checklist to stay on task.
- Make an Assessment
Once your taxes are filed, take an assessment of how things went this tax season by making a list of the things that went well and any areas where improvements can and should be made. Were you organized and efficient in getting things ready for tax preparation or were you disorganized, behind on entering transactions, finding yourself under a lot of pressure to get the job done? Many business owners work very hard to pull it all together at tax time leaving them stressed and exhausted. You may be tempted to take a long break, but now is the perfect time to reassess and plan for next year while everything is fresh in your mind.
- Meet with Your Tax Adviser
Make an appointment to meet with your tax adviser during the summer months to discuss how you could better prepare your records for next year and to discuss tax saving strategies. At this time of year, your tax adviser can devote more time and attention to planning for next tax season. This will help you get ready and put things into place now before the busy season approaches.
- Evaluate Estimated Taxes
Review your tax liability from last year and consider your expectations for profit levels based on midyear sales and expenses. Are your estimated tax payments in line with profit levels? Adjustments to estimated tax payments will help you avoid any nasty surprises at tax time and, if your profit levels are down, lower estimated tax payments will increase cash flow.
- Begin Tax Planning
Look for ways to improve your tax situation by reviewing pending tax law changes and current tax reduction opportunities. Business tax credits and deductions should be taken advantage of when profit levels are increasing in order to minimize tax liabilities. Major equipment purchases, hiring additional employees, making improvements to business properties and adding benefits for current employees are all areas to consider. Visit www.irs.gov for the latest in tax developments for businesses. You can also subscribe to IRS Tax Tips. Once you subscribe, you will receive emails each business day during tax season and three times a week during the summer.
- Get Organized
Based on input from your tax adviser and the assessment you performed right after tax season, put into place some process improvements to make your record keeping system more efficient and less time consuming. The goal is to have a system that provides a high level of accuracy with complete data right at your fingertips. Make a list of the documentation you needed last year at tax time. Use it as a check list for this year and begin early to pull together the documents you need. For example, if you purchase a piece of equipment for your business during the year, you will need the sales receipt at tax time. Make a file for the current tax year to use for any documents you will need at tax time. Searching for the receipt months later is much more difficult than simply setting up a file and putting it and other documents away throughout the year.
- Use the Right Tools
Consider your record-keeping system. How could it be improved? Are there tools you can use to streamline the system? Can you replace manual processes with automated tools? Online accounting makes it easy for you to stay on top of data entry because you can work from anywhere you have internet access at any time. Make sure you are fully utilizing the functionality of your record keeping tools and, if you use online accounting, take full advantage of the wealth of information provided by your service.
- Keep Transactions Up to Date
One of the most important things to do as soon as tax season ends is make sure you keep your data entry up to date. Putting off entering transactions will lead to frustration at the end of the year, a greater possibility of errors, and may mean missed expenses recorded and therefore not taken as deductions. Make a list of tasks to complete to stay on track. Categorize the tasks by frequency such as daily, weekly, and monthly. For example:
- Enter all open invoices
- Record daily deposits
- File receipts and other documentation
- Issue sales invoices
- Review tax updates
- Generate and send customer statements
- Reconcile business accounts
- Review past due accounts
8. Consider Enhanced Services
Does your business need enhanced services? Every growing business must get the assistance they need to support that growth. After identifying areas that could use some improvement in your assessment in tip number 1, consider what services might help you get organized and be well prepared for the next tax season.
Some examples include:
- Payroll and Payroll Taxes
- Time and Attendance
- Human Resources
- Employee Benefits
- Online Payment Services
- Inventory Control
9. Create Reminders
Use calendar entries, alarms, and scheduling tools to create reminders for yourself to ensure you don't let deadlines slide. There are many options available on your computer, or phone. Or you could use a paper calendar to help you form habits that become part of your routine.
10. Retain Records
Set up a record retention policy for your business and annually discard records you no longer need based on that policy. Reducing paper records to levels required helps keep you organized and can help prevent you from becoming overwhelmed.