It’s mid-March, and for most of us, that means time to crack open “the book,” wrangle W2’s, apply for deductions and eagerly await returns from the state and federal governments. March brings the promise of spring, but also the specter of tax season.
Do you have any year-round tips to help make tax season a stress-free period?
Jelena Arkula (JA) – “Prepping for tax season should be done throughout the year, not just during the tax season. The best practice is to have a monthly checklist and to follow the steps every month. It’s really important that business owner reviews the financials with an accountant/bookkeeper on a monthly basis, or at least once a quarter. This step is crucial and a prerequisite for a stress-free tax season. Another as important step is good record keeping. Often we have to chase vendors for the W9’s after the payment has already been made. Getting into the habit of obtaining the W9 and storing it some place safe (i.e. the Cloud) will keep you safe from being charged a 28% backup withholding tax on the top of the payment to the vendor, plus penalties and interest (https://www.irs.gov/taxtopics/tc307.html)”
What’s the most common document that people (your clients) misplace?
Cindy Schroeder (CS) – “The most common documents clients misplace are often the payroll tax filings and sales tax filings. Also copies of 1099’s and W2’s round out the list. All of these documents are important, as your CPA will ask for them to process your tax return.”
What products or software do you use to keep track of your (or client) expenses?
JA – “Books LA is proudly using cloud solutions. We love the workflow where we don’t necessarily have to enter the data; rather have the data flow from the scan all the way to the accounting software. The exact workflow we use varies from client to client. Here are few examples:
What deductions should small businesses always have top of mind to help them save money in the long run?
CS – “I think the biggest missed deduction is mileage. It’s important to understand the rules about what type of mileage is deductible. Traveling from your home to your office is not deductible, but traveling from your office to a meeting is. There are a lot of products you can use to help you keep track of the miles you drive for business. My favorite is Mile IQ.”
What are the most common myths about tax season?
CS – “I find the biggest myth is that your tax accountant is going to analyze your business while preparing your tax return. Many of my clients are surprised when I come in (as their bookkeeper) and ask them questions about their financials that no one has ever asked before. They have this false opinion that their tax accountant is actually analyzing everything they are doing. You hire your tax accountant to prepare your taxes. There are many tax accountants that will offer advisory services in addition to the tax preparation, but for many they only prepare your taxes and will question the financials only if there are huge grievances.”
What other helpful tips can you pass along to our readers?
JA – “When thinking about record keeping, pull the credit card statement from 3 years ago and look up one month. Will you be able to remember what you purchase from Staples, or Best Buy, or who were you with on that business lunch? Now, imagine that auditor is asking you these questions and is looking for receipts as well (because a charge from Staples might have been for gift cards, or school supply for your child – and both are not deductible). Now, imagine that you have scanned all your receipts and you have them in one spot, and can find the receipts with one click or CTRL+F? What a relief! :)”