When I was a child there were three times a year that really stuck out. I loved the first day of a new school year because I got to wear my new school clothes. Christmas, because I got to eat Christmas cookies. And the last day of school, because it meant sun was coming in two more months.
But now I have one more time of year to add to my ever important calendar of events. Tax time. It always feels like tax time. Actually, it feels like tax time comes around more then Christmas.
Being a bookkeeper, I deal with the everyday worries of clients trying to prepare for their accountant and year-end taxes. I hear on a regular basis: "I will never do this again! I am going to be organized next year." Even more commonly, I hear, "Help!"
As a business owner, time is not on your side. Preparing to do your tax return is just another task on your already full list of things to do. It's easy to let those accounting tasks slide. Yet properly preparing for your return, if done the right way, you could save hundreds if not thousands of dollars. There are many things you can do to save money and time this tax season.
TIPS FOR TAX PREP
The following are some tips commonly used to help streamline your tax preparation process:
Meet with your accountant before April.
If you take an hour to meet with your CPA they can give you a list of things they need in order to do your taxes properly. This will cut down on the back and forth conversations between you and the CPA regarding missing or incomplete information. You can simply go down your check list and gather all the information needed. Once you bring your packet of information to the accountant, the accountant can more efficiently process your return.
Keeping your books up to date will save you time at year end.
If you reconcile your books on a monthly basis, come April you will have all your data right at your fingertips. There will be no fumbling through files, in between car seats or in the crevasses of wallets looking for missing receipts and lost deductions. If the books are up to date that also usually means there will not be any unwanted tax liability surprise.
Review. Review. Review.
If you review your books before you send them to the CPA, you will catch simple errors and odd transactions. Those transactions may jog your memory. You can easily correct the error. These simple mistakes can be costly. The accountant then has to investigate the error and most likely contact you regarding the situation. Also review your miscellaneous expense or unknown expense categories. Accountants don't like to see any transactions in these categories.
DEDUCTIONS
Maximize your 401(k) deduction.
"Have you maxed your 401(k)?" I hear accountants ask this question more than any other question. The deductions lower your taxable income.
Convert non-deductible interest expense to deductible interest expense.
An example of this would be to pay off your credit card debt or auto debt with equity in your home. The home mortgage is deductible; the credit card or auto interest is not.
There are many medical deductions you may qualify for.
Possibly, you didn't really think about these deductions in the past. Hearing aids, eyeglasses, contact lenses, hospital fees for nursing, physical therapy, lab tests and x-rays are all deductible.
LAST MINUTE TIPS
Call your CPA to set up an appointment, even if you are not ready. Accountants are extremely busy this time of year. Two-to-three week turnaround times are normal in the height of tax season. By setting that appointment you will set your place in line. You will also force yourself to have all your documents ready by that date as well. Is there anything more motivating than a deadline?
Diana Gregory owns Small Business Accounting in Kirkland. She can be reached at dgregory@kirklandsba.com or www.kirklandsba.com.
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