March 15th, 2021 is the deadline for those that have an S Corporation election (Form 1120S) or those filing a Partnership return (Form 1065). For everyone else, April 15th is still the date to keep in mind for getting your taxes filed on time. While this time of year can be stressful for business owners and individuals alike, here are some tips to help you through tax season.
Having an organized system in place is the surest way to reduce stress and ease anxiety during tax time. When you’re organized, things don’t really have a chance to fall through the cracks because you’re there to catch things as they come up. This also ensures you’re not misrepresenting your business. What I mean by that is, if you have income that you didn’t report, you’ll be on the hook for potential penalties and fees. The flipside of this is that if you forget to track your expenses, you’re going to have to pay more in taxes than necessary.
You have to keep in mind that as a small business owner, expenses equal deductions to your income. If you’re not keeping good records, and don’t have a system in place to track transactions, you are potentially missing out and paying more in taxes than what is necessary.
Set Up Systems
This really goes back to being organized, however, having a system in place to maintain organization is key. I personally have a recurring calendar reminder to upload my monthly statements to my bookkeeper. Within a few days after my upload, I’m able to log into my books and see where I stand and do a quick review of all of the entries. I’m able to see my income for the month, my expenses, and base business decisions going forward off the information.
This is a great way to systemize a monthly check-in for your business as well. These are some of the things I mutter to myself when reviewing my books: “That expense doesn’t look right? I can’t believe I’m still paying for “x,” I don’t even use that anymore! Wow, sales have slowed down … I need to focus on more marketing this month.” See what I mean! It really helps me feel in control and well-informed to have a solid understanding of what is going on.
This brings me to planning your business strategy for the year. By being organized, and having a system in place, this allows you to make business decisions that make sense for you. I like to pull a profit and loss statement quarterly. Over time you will notice cycles or trends in your business. Maybe Q1 and Q2 are highly profitable but things tend to slow down in Q3. By knowing this information, as a business owner you can make the strategic decisions to wait on large purchases or stockpile cash to cover expenses during your slower months.
Working for yourself is a tough job, that is why entrepreneurship isn’t for everyone. While you’re pursuing your dreams you want to make sure you’re taking care of yourself and you have something to show for all of your hard work. By having that bird’s eye view in advance (vs scrambling at tax time) you can have the foresight to grow your net worth, reduce taxes, and retain those really great employees that have been with you from the beginning. A retirement plan allows you to do all of those things. The problem is that you have to start them at the right time and you have to know your books really well to know whether it would be beneficial for your business.
Let us help you! Are you a small business owner who needs someone on their side to provide objective tax planning and business strategy planning? We can help you get organized and present the best options for your business. Schedule a call with us today.