thread Re: What are your best practices for tax preparation? in Community Corner

What are your best practices for tax preparation?

tranguyen — Mon, 16 Dec 2024 16:30:08 GMT

Hey everyone 🌟

Running a business is hard enough without adding the complexity (and headache) of filing taxes each year. Although it can be a daunting task, the right preparation can help you breeze through it.

Which is why we’d love to know:

What are your best practices for tax preparation?

Whether it’s how to organize all your records or self-care tips to get you through it all, I can’t wait to read everyone’s reply!

P.S: For our US folks 🇺🇸, don’t miss our AMA with Aja Evans Counseling — it’s a great opportunity to share any questions or anxieties you have around your business tax journey. Ask your question here!

Re: What are your best practices for tax preparation?

maxpete — Wed, 27 Mar 2024 20:19:53 GMT

@TheRealChipA I know you always have great advice around this!

Re: What are your best practices for tax preparation?

Candlestore — Thu, 28 Mar 2024 16:44:54 GMT

@tranguyen ;

For me it is keeping good records through out the year. I also use an accounting Software package to track information that Square does not, like Expenses, and my inventory to Make my candles. I then just sent over my accounting documents and other required items to my accountant. If they have any questions I can quickly locate the information needed if it is something I forgot to sent the accountant. For example today I got a phone call asking what Check number XYZ was for and was able to get it the information for them while I was on the phone. Just because my accountant asks for information on a Check does not mean its a Check that I physically wrote with the help of Bill Pay through my bank. Some checks are coming from my bank and when adding a payment that way I forget some of the details to add so they show on bank statements. I also asked my accountant what tax software I should use to make their job easier to save time. Time is money and the longer it takes them to do my taxes the more it costs me. So sometimes the cheapest software may cost you more at tax time for preperation by your accountant.

Documant all money coming in and out of your business accounts!!, a $10 charge that you did not write down in January of 2024, you will not remember what it was for come Tax time in 2025.

Re: What are your best practices for tax preparation?

maxpete — Thu, 28 Mar 2024 17:20:35 GMT

Love how meticulous you are with tracking, it definitely is helpful!

Re: What are your best practices for tax preparation?

Bronze_Palms — Thu, 28 Mar 2024 23:38:26 GMT

According to 2022 taxes, I was responsible for x% in taxes on my Owners Draw. In 2023, I added up how much in Owners Draw I was responsible for every quarter, multiplied it by x% and payed that. I have a tax account that is replenished by Square Savings with every transaction so I don't have to "come up" with the money when it is due.

Re: What are your best practices for tax preparation?

maxpete — Thu, 28 Mar 2024 23:46:33 GMT

And I'm sure that brings a lot of peace of mind!

Re: What are your best practices for tax preparation?

MudFire_Dex — Sun, 31 Mar 2024 19:46:11 GMT

It is definitely about being careful all year so that tax time is less stressful. Using business only checking, debit, and credit accounts makes things a lot easier.

Re: What are your best practices for tax preparation?

maxpete — Sun, 31 Mar 2024 22:40:50 GMT

Most definitely agree! Having separate accounts is key

Re: What are your best practices for tax preparation?

JUYBoutique20 — Tue, 02 Apr 2024 20:06:16 GMT

I hired a bookkeeper 2 years ago and it has been life changing. She runs everything every 2 weeks so if there's any discrepancies, they can be taken care of early....

Re: What are your best practices for tax preparation?

maxpete — Tue, 02 Apr 2024 20:07:52 GMT

This is super smart! Glad you have this resource 🙂

Re: What are your best practices for tax preparation?

DinaLRosenberg — Wed, 03 Apr 2024 11:51:46 GMT

I know not every business owner is in this position- but we have an accountant on retainer monthly; they handle our rec, P&L, & taxes so we literally need not do anything!

Re: What are your best practices for tax preparation?

maxpete — Wed, 03 Apr 2024 11:59:31 GMT

This is the way to be if you can afford it, saves so much time and stress!

Re: What are your best practices for tax preparation?

TheRealChipA — Wed, 03 Apr 2024 17:25:31 GMT

Someone is always late to the party, and this time it is me! LOL. Honestly, the posts already made on this subject are all spot-on. I’ll reinforce a few things that make me actually look forward to tax time, if that’s possible.

First, either invest in a great bookkeeper/accountant, or invest in stellar accounting software (ie - NOT QUICKBOOKS!). Make time every day to keep the books up-to-date (I do that every morning for a few hours before I open the shop). Don’t procrastinate the daily routine without a spectacularly great reason, and then try not to procrastinate it anyway. Ha. At the end of the year, tax preparation for me is nothing more than printing some reports that I import into a spreadsheet that organizes everything for entry into my tax preparation software. Currently, I use Zoho Books which I have found to be hands-down the best small business accounting package on the market. But, I love most all things Zoho, so there’s that.

Second, even if you are (like me) using tax preparation software (we use TurboTax for Business for our 1065s), budget enough money each year to have an accountant/CPA review the returns. I know bookkeeping and taxes. In my former life as a software engineer I developed more than a few such systems for large corporations. But taxes are complicated and software can’t possibly think of what I forgot to do. That’s where money spent on expert eyes is worth it. We are lucky to have the same CPA we’ve had for over a decade now for our personal returns. He reviews the 1065 returns I create (three of them) to be sure that I’ve crossed all my “T”s and dotted all my “I”s.

Re: What are your best practices for tax preparation?

maxpete — Wed, 03 Apr 2024 17:26:53 GMT

@TheRealChipA the party doesn't start until you arrive!

Thank you for these helpful insights!

Re: What are your best practices for tax preparation?

Bronze_Palms — Wed, 24 Apr 2024 22:26:07 GMT

I have a great CPA that helps me breakup the tax requirements for me. After doing it wrong for so many years, I decided the investment was worth it.