Summer flew by, and tax time is closer than you think. Before your calendar fills up with holiday parties, trips, and other end-of-the-year festivities, now’s the time to gather your tax paperwork and get organized. Follow these steps to help ensure that tax season runs smoothly.
1. Contact your accountant. Come March and April, most accountants are booked solid and have little time to really sit down with you and explain options for minimizing your tax liability. By being proactive and scheduling an appointment now, you’re more likely to have her full attention and get important questions answered. Don’t have an accountant yet? Now’s the time to ask around for references and find someone you trust. It beats being knee-deep in paperwork yourself, and they may discover deductions you didn’t even know about! Plus, if your business is ever audited, having a professional to guide you through the process will make things much easier.
2. Compile your paperwork. Before you meet with your accountant, it’s a good idea to gather important documents like bank statements, receipts, mortgage statements, and records of charitable donations (cash and in-kind contributions). Compile a list of expenses and total up the amount your business has earned and the amount you’ve already paid in quarterly estimated taxes (assuming that applies to you and your business). If you’re missing anything important, like a receipt or bank statement, now’s the time to track it down or request back-ups. Many of these forms are now available securely online, so that makes things a lot easier.
3. Research possible tax credits. Your accountant should know what (if any) tax credits you and your business may be eligible for, but it’s constantly changing, so it’s a good idea to do some research on your own to ensure that you ask the right questions. There may be small business credits that haven’t been widely publicized but could be beneficial to your business.
4. Contribute to your retirement account. Generally, you have until April of the following year to make tax-deferred contributions to your retirement plan. Still, it’s a good idea to do this now so it doesn’t get overlooked in the tax season shuffle. Ditto on using up any money that’s left in your Flexible Spending Account (unlike an FSA, a Health Spending Account usually rolls over from year to year, so skip this step if you have an HSA in lieu of a FSA).
5. Be wary of tax season scams. The recession has brought out scammers in full force. Sometimes these shady characters will pose as the IRS and send you an email requesting your bank account information, social security number, or other private financial information. Whatever you do, don’t respond! The IRS does not use email to discuss tax matters with taxpayers, so you can safely assume that it’s a scam and delete it.
By planning for tax seasons well in advance, you’ll avoid paying penalties or making careless mistakes at the eleventh hour.© Copyright 2010 Ali Brown