An important way to avoid tax compliance issues is to see your accountant throughout the year rather than just at tax season. Accountants do so much more than file tax returns and you should be taking advantage of the other services they offer.
When you have regular business checkups with your accountant, you’ll have the opportunity to improve business processes, increase profit, and save tax. You’ll also have a much clearer picture of how your business is doing financially. This can help when it comes time to pay your taxes.
Communicating with your accountant throughout the year has many benefits for you and your business. Here are five to consider.
1. Asking questions can save you money.
Sometimes clients fear contacting their accountant because they think it will add time to the bill, increasing their costs. Asking questions is a good thing. It lets your accountant know what you’re up to, and it can clarify things for you.
For example, if you’ve just made a major equipment purchase and you’re not sure how to post the transactions to your bookkeeping program, checking with your accountant first can save you (or your accountant) the trouble of reallocating your entries later.
Most accountants make notes in their clients’ files when they learn about capital asset purchases, and this will be helpful when it comes time for your financial statement year-end preparation. If your accountant bills by the hour, this phone call to ask a question could save you money.
2. Waiting until tax season can cost you.
You should keep your accountant up to speed on any changes in your business in case they might affect your business taxes. Sometimes, clients put off their bookkeeping all year then complete all their data entry during tax season to get their records caught up.
The problem with this method of bookkeeping is that it doesn’t leave any room for tax planning. Keeping your bookkeeping current saves a lot of stress and headaches, not to mention the potential tax savings that go along with a little tax planning.
Staying current with your bookkeeping records helps you plan for purchases (or tax payments) so you can better manage your cash flow. It’s also nice to be able to plan how you’re going to pay a large tax bill.
Finding out you owe $20,000 when your corporate tax return is due can be tough news to take, but that same news six months into the year allows you to budget for that $20,000 by making a smaller payment each month.
3. Planning is important.
Tax planning isn’t something you can do retroactively. If you only see your accountant during tax season, it may be too late to plan properly. Tax planning is more than just budgeting for your tax payments. There are decisions you can make in your business regarding certain tax strategies that can save you money.
Paying wages to business owners is one of these strategies that may save tax, but only if done within the IRS guidelines and on their timeline. Everything has a deadline. If you miss the deadline to make payroll remittances, that tax planning opportunity is lost too.
4. Communicating changes saves time.
Accountants can’t provide optimal service if they don’t know all the facts. Changes in your business need to be communicated to your accountant even if you think they may be insignificant.
Things like hiring extra staff, offering new products, or opening another location will impact your business in major ways. By communicating with your accountant, you can plan for these scenarios in order to make sure your business doesn’t suffer.
When your accountant knows what’s going on in your business, they can help you in the best way possible. Many accountants use flat fee billing, so an extra meeting won’t increase your bill.
5. Eliminating stress is nice.
Wouldn’t it feel good to have an idea of how much tax you owe before tax season comes around? Seeing your accountant more than once a year can eliminate the stress of not knowing what’s coming.
Remember if you’re incorporated, the tax deadline is the 15th day of the fourth month following your company’s tax year end with an opportunity for a six-month extension. Depending on your previous year’s amount of tax owing, you may be required to pay estimated taxes.
Some types of businesses experience predictable sales patterns and cycles. This information can be used to estimate your tax payments before you file your tax returns. The IRS does a version of this when they calculate the amount of estimated taxes they want you to pay.
Even if things change dramatically in your business from year to year, your accountant can estimate your taxes by using the information available at the time then projecting your income over a full year.
If your business is showing an increase in sales and you’re only five months into the year, your accountant can estimate the remaining seven months of sales income. This information, along with estimated expenses will be used by your accountant to calculate estimated taxes for the year and determine if you need to increase your payments.
So, don’t wait until tax season to contact your accountant. Schedule an appointment to check in even if you think nothing’s new. Tax laws change all the time, and it’s your accountant’s job to stay informed. You may discover a new tax credit you’re eligible for that you wouldn’t have known about if you hadn’t made the call to your accountant.
Scheduling regular meetings or phone calls with your accountant throughout the year will help you prepare for what’s coming into your business. By staying in touch and keeping your accountant informed of what’s going on in your business, you give yourself and your accountant the opportunity to plan for the future.
If being prepared for what’s to come at tax season rather than scrambling at the last minute sounds good to you, contact us to schedule a free consultation.