In Part 1 of Dreading Another Tax Deadline? Streamline Your Company, we highlighted the fundamentals to streamlining your small business’s tax management and processes. In this second installment, we’re going deeper and outlining the more detailed steps to stop stressing about your taxes.
As our previous blog noted, meeting your tax deadlines is a function of both your reporting and having the cash on hand to pay what you owe.
So, it should be no surprise that these are the two areas you must focus on.
Make Timely And Accurate Tax Reporting A Priority
Whether you manage your bookkeeping independently, have an employee managing it for you or work with a bookkeeper or full-service firm, this critical function must be a priority.
Taking the time to maintain accurate records throughout the year not only saves you time in the long run, but also goes a long way in ensuring that you meet your tax deadlines. If you don’t have a record of important information that might save your business money, how could you report on it?
Poorly maintained records lead to end-of-the-year scrambling and last-minute tax preparation, both of which cause plenty of stress. In addition, you’re more likely to make mistakes if you aren’t maintaining accurate records throughout the year. These mistakes lead to costly penalties and take even more time to correct.
Bookkeeping The Right Way
If you handle your bookkeeping yourself, there are a number of software products available to help organize your records and make the process more manageable.
Beyond this high-level step, you should take additional actions throughout the year to keep accurate records:
- Track your sales and collected sales tax on both a daily and monthly basis, especially if you’re in retail.
- Track how much you pay your employees and how much is withheld from their paychecks each period.
- Consistently calculate and log the proper amount of payroll tax to withhold from your employees (estimating payroll tax and reconciling at year-end is incredibly time-consuming).
Although these steps may seem burdensome, they ensure the accuracy of your records and save you time in the long run. If you don’t feel that you’re able to commit to these responsibilities, seek an advisor who’s able to provide such tax services for your small business.
Even if you do have the support of a tax consultant, storing all of your information in one place expedites the process of filling out forms and filing your taxes, limiting the risk of missing your deadlines. The “shoebox method” of collecting physical receipts and invoices increases your risk of incurring late-filing penalties.
Manage Potential Cash Flow Problems To Pay Your Taxes On Time
Even if you take the initiative to address your tax needs throughout the year, you still must have the cash on hand to pay your taxes. If you don’t manage your cash flow properly, you’ll face potential tax problems, from late-filing penalties to extremely high interest rates on the money you owe.
If you tend to have cash flow problems, be sure to set aside the money you’ll eventually owe the IRS or other government agencies. At the beginning of each week or month, put away a certain amount of cash to make payments at tax deadlines.
Remember, tax management and meeting your deadlines isn’t a simple fix. If you make taxes a priority and a year-round emphasis, you’ll save yourself stress and money. Who wouldn’t benefit from less stress and more money?