As the end of the year draws closer, so does the beginning of a season most business owners dread – tax season!
While there aren’t many ways to really make tax season enjoyable, one thing business owners can do to make it easier (well, somewhat less stressful), is by beginning tax preparation before the end of the calendar year.
There are several reasons why beginning tax preparation before the end of the year is a good idea. Here are some of the best reasons you might want to consider starting to prepare for your taxes now — to make this procedure — tolerable.
It saves time
Tax preparation should be something you do all year long rather than waiting until the end of the year or right before the tax deadline in April. By creating an organized method for tracking business expenditures and income throughout the year, you can drastically reduce the time it takes for you to gather information later. In addition, you may also cut down on the time it takes your tax preparer to wade through the information you provide in order to complete your tax return, saving you money too.
You can file earlier
When you spend the necessary time throughout the year meeting periodically with your accountant and staying organized, you stand a very good change of being able to make a final appointment with your accountant without hassles or delays. At least you will know where you stand with your taxes. This can put you in a good position to be able to complete and file your taxes on time or maybe even early.
It enables you to avoid paying penalties
Why should you be concerned about filing your taxes on time? Failure to do so can cost you.
According to the IRS, the late filing penalty is usually 5 percent of the unpaid taxes for each month or partial month that a tax return is late. The penalty begins accruing the day after the tax filing due date and will not be more than 25 percent of your unpaid taxes.
If you file timely but do not have the ability to pay when you owe, you could incur a late payment penalty of between ½ and 1 percent of your unpaid taxes. Filing an extension is an option available to you, but you may still have to pay interest, late fees, and penalties up to the point you file your return.
You have been thinking, stewing, stressed, and probably not all that nice to be around — because of your taxes — which (taxes) may not be as bad as you think. You may want to consider what all the thinking…etc., is doing to your health.
The best way to avoid all of this is to have the necessary documents and paperwork gathered and given to your accountant timely so your tax return can be filed on time.
You can set aside money to pay a large tax bill
As a business owner, you can’t afford not to know how much you may have to pay in taxes when the time comes. One of the best things you can do to ensure you have the funds available to send in with your return is to set aside money all year long. When it’s time to write the government a check, you will have the money to make the payment and avoid late payment penalties. Plus, if you’re setting aside money throughout the year, you’ll be able to easily make your required quarterly tax payments to avoid fees on those as well.
It saves money
Although I already mentioned how tax preparation can save money by avoiding penalties, there are a couple of other ways you can save as well. Hours of digging through stacks of paperwork and receipts take you away from other business tasks you could be doing to grow your business and generate a larger income. And finally, by working on your taxes earlier in the year you can take advantage of tax laws to ensure you maximize all of the deductions you should as well as making business decisions that can help you lower your tax liability.
You can budget more accurately
When you properly prepare for the upcoming tax season it gives you an advantage for next year’s budget. Tracking income and expenditures can help you to know what is working and what needs to change in your business. Tax laws can affect your bottom line as well, so the sooner you find out about them the better you will be able to prepare for the business year ahead as well as make any needed adjustments before the current year has ended.
It can reduce stress
The end of the year is a stressful time. There are holiday parties to attend, gifts to buy and wrap, and so many other extras it can be hard to know how you will ever get everything done. It is only going to add to your stress level — as mentioned before — if you’re trying to get a year’s worth of bookkeeping done in a short period of time.
Working on your taxes throughout the year gives you a better chance of being able to spend more time with your family enjoying the holidays instead of stressing out over all of the paperwork you need to do and all of the business decisions you need to make before the year closes.
The bottom line is that there are plenty of reasons why you should begin business tax preparation before the end of the year. I hope you’ve already started.
What other reasons can you think of why you should begin business tax preparation before the end of the year?