January 9th, 2018 Dominique Molina (Taxloopholes.com Tax Strategist)
Just because you’re hiring someone to do your taxes doesn’t mean you want to pay them more than what’s necessary. If you show up at your tax professional’s office with shoeboxes full of receipts, she can absolutely turn that into a tax return; however, it’s going to take much longer than it would if you simply brought her a copy of the updated accounting software database for your business.
Preparation will save your tax professional time and will save you money. Here are some ways you can streamline the tax process for your business:
This is a bit more complex when you’re running a business than when you work for someone else, but the principle is the same. You need to know how much money your business takes in and from what sources.
Accordingly, you also need to know where your business’ money is going. You need to be able to identify, at least in general terms, what you spent on categories such as inventory, office supplies, equipment, and more.
One way to organize your expenses and your income is with an accounting software package. To be sure, you still have to use it on a regular (read: daily) basis for it to be useful. Every time you send out an invoice, the software will track it. Whenever you enter a receipt, you can categorize the purchase, saving tons of time and work at tax time.
By becoming generally familiar with the kinds of deductions you’re going to be able to take, you’ll save your tax preparer quite a bit of time. No one expects you to readily know all of the deductions you’ll qualify for; after all, that’s why you’re hiring a tax professional to begin with. But if you know that you’ll likely qualify for the Earned Income Tax Credit, for example, raise the issue early with your tax professional and know what documentation you’re going to need.
Depending on the nature of your business, you might have a number of year-end forms and statements that need to be considered when preparing your taxes. This might include things like 1099 forms, brokerage account information, profit & loss statements, and more.
If your business pays quarterly estimated taxes, you should consider meeting with your tax professional at least once during the year. This mid-year checkup will do a number of things for you. It will:
A mid-year tax meeting also spreads your tax professional’s work out so that you’re not facing a mad dash all at once when taxes are due.
Your tax professional should be interested in saving you money and time. Many tax professionals will provide you with a checklist of items to bring to your tax appointment. If your tax professional doesn’t automatically provide you with such a list, ask for one.
This list will help you gather all of that data that you organized in #1 above. Just because you have everything in its place doesn’t mean you always know what your tax professional will actually need to do your taxes.
Ultimately, you’re in partnership with your tax professional. Her job is to help you get your taxes filed as accurately as she can and to help you avoid paying more in taxes than what you need to pay. Your job is to provide her with all of the relevant data and tools to do that. If you spend just a little bit of your own time pulling all of this together, you’ll reduce the number of billable hours you need to pay your tax professional.