3 Simple Tips for a Stress-Free Tax Season
There are a few common mistakes you must avoid if you want to have a successful, audit-free April!
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My accountant has a great saying:
Pigs get fed. Hogs gets slaughtered.
It's tempting at tax time for lean startups to want to hit every deduction and write-off possibility hot and heavy, but if you get too carried away, or make the mistake of doing your taxes solo, you could be in for a rude awakening from the IRS. Whether you're filing your personal taxes or your business returns this time of year, there are some important things to keep in mind that will ensure you don't get audited.
Related: 4 Tax Code Changes Small-Business Owners Should Know About
While I'm not a tax professional, after years of being an entrepreneur operating businesses in both Canada and the U.S., I've learned some general tricks and tips along the way that can help you out this tax season. Here are three things you should do to ensure an accurate and epic tax filing in 2015.
1. Hire a professional
Seriously, there is no excuse for not hiring a tax professional to file your taxes, and that means your personal taxes, too. A professional is going to help you with way more than filing alone.
First, discussing your personal taxes and helping them understand that connection to your business taxes is going to help you gain a strategic planning partner. Second, they're going to know all the applicable laws, regulations and proper deductions. That will save you money on deductions and if applicable, tax refunds, but is also going to prevent you from making incorrect deductions and costly mistakes. Finally, a tax professional will be able to give your taxes the second look they need before filing that will keep them accurate and error-free.
How do you find a good tax professional? I've always found it's best to ask another entrepreneur you know and trust, or several, for their recommendations. Filings can be complex for startups, so it's good to get someone that your peers not only know and trust, but that will understand the complexities of entrepreneurship.
Related: Your Business, Only Leaner: Why Savvy Spending Starts From the Top
2. Get organized
The more organized and straightforward you keep your receipts, records and books, the faster and easier it's going to be for your tax professional to file your returns. That ultimately saves you a lot of time and money.
Come up with a physical and cloud filing system that you can use all year. It might be too late for you to get organized for your 2014 docs, but set it up for 2015 and use it moving forward. Keep any physical contracts or paperwork in a specific, labeled 2015 file so you'll know right where they are when you talk with your accountant.
For the non-physical documents and records, you should already have a bookkeeper or accounting staff member keeping track of all your invoicing and payables via an accounting software system such as QuickBooks, Xero or Freshbooks.
Keeping yourself organized throughout the year will save you time, money and a lot of stress at tax time. Be proactive!
3. Be honest
This is the easiest piece of advice out there, but for some reason during tax time we all want to slip into the gray area. Just stay honest. Don't try to get creative with your accounting and keep it straightforward and you shouldn't have any problems.
Another great thing about a tax professional is they can help keep you and your tax filing on the straight and narrow. It's tempting to want to maximize your tax breaks and even tax refunds, but never make a claim that would affect your integrity. It's just not worth it.
Related: The 5 Biggest Tax Differences Between an LLC and Corporation