For Marin small business owners, January, February, and March are often a scramble to get taxes ready. We see it first hand at the San Rafael office of Books in Balance, as clients come to us with their bookkeeping and taxpreparation questions. But what happens after the storm? Once the dust settles from getting taxes done, it may seem strange to start planning already for next year’s taxes.
What Should Marin Small Business Owners Do to Prepare For Next Year’s Taxes?
However, doing exactly that is a smart way to go about business planning and individual tax planning as well — and it may save you both money and potential headaches come the next tax season. Here are eight critical things you can do once your taxes are filed.
It may sound silly, but tax season for many people is a rush of additional responsibilities on top of their daily duties. Assembling invoices, expenses, receipts, and other important information — in addition to talking to your bookkeeper and your CPA — can feel like a second job on top of keeping your business running. If you’ve finished your taxes, it’s okay to take a break and breathe for a little bit. And if you got a return out of it, treat yourself to something nice — you’ve earned it.
#2 Review Your Filing
Everyone should review their tax filing after its processed. That doesn’t mean that you don’t trust your CPA or your bookkeeper; instead, a thorough review is more about getting an understanding of how your taxes shook out. Were there missed opportunities? Were there things that you should have tracked better? Even if the answer to those types of questions is “no,” reviewing your filing at least helps you understand the how and why everything slotted out. At the very least, this knowledge will help you prepare for next year’s filing, and in turn hopefully making it a faster, smoother process because you’ll have a head start on organization.
#3 Work with Your Bookkeeper
After you’ve reviewed your filing, it’s a good idea to talk with your bookkeeper. If you’re simply looking to make the preparation process smoother for next year, you can use the knowledge gleaned from reviewing your tax filing to get a head start with your bookkeeper. When you discuss your filing with your bookkeeper, you can identify things that should be tracked more closely to create an easier preparation for next year. Your bookkeeper may also be able to recommend additional tools, such as tracking and expense apps, that can be used to make things easier. They can also offer recommendations of things to keep an eye as potential impacts (positive or negative) as you consider the year ahead.
#4 Consult Your CPA
After you give your CPA a post-tax season break (trust me, they always like a breather after April), it is worth your time to get in touch and talk about your filing, especially if you encountered any questions or concerns with your current year filing. Even if your question is as simple as “how can I get a better return?” or “how can I prepare things to avoid making payments?” talking things over with your CPA can help you identify potential things that you’ve missed. Your CPA will also be able to identify potential deductions that may apply to you if you plan ahead properly. This discussion will most likely be equal parts looking back and looking forward, but it’s better to have it in the middle of the year rather than right before the calendar year ends (when things no longer qualify) or right before you file (when everyone is scrambling).
#5 Consider 2018 Changes
How is your business or personal life changing in 2018? Perhaps you’re hiring more people, or perhaps you’ve changed your status from being a sole proprietor to an LLC or other life changing situations like divorce or maybe you’re expecting a baby. There are many variables at play here, and they often create a ripple effect on how your taxes are processed. By thinking smartly about the way your affairs may evolve and adapt in 2018, that gives you the foundation for making the right choices and doing the appropriate research so you don’t get caught off guard with your filing come March 2019. Business variables to consider include employee status changes, sourcing/expense changes, budget changes of any kind (marketing, equipment, etc.), necessary equipment upgrades, home office changes, and projected sales/income changes.
#6 Project Out the Rest of the Year
When you’re considering the potential changes for the calendar year of 2018, one significant sub-category is projecting out your business expectations for the rest of the year. This is different from other changes, such as equipment upgrades; I’m talking specifically about how much revenue you think you’re going to make. The factors behind this are numerous; everything from economic climate to marketing opportunities to simply gradual word-of-mouth growth are reasons why your business may grow or decline over the course of 12 months. This projection not only affects your practical budget for the year, it also impacts how you may look at early tax-prep plans as well as how you handle your quarterly payments and deductions. Even if you’re only looking at a remaining half-year, it’s still a smart thing to do. As the Boy Scouts say, “be prepared.”
#7 Explore Tax-Deferred Savings
Is your small business taking advantage of tax-deferred savings? A number of different plans exist, and how they apply to you depends on a few different things. For example, if you’re a sole proprietor, then you have some more flexibility on individual tax-deferred plans that technically exist outside of your business filing (but still impact you). Other tax-deferred savings options include plans for employees such as SEP IRAs and 401(k) plans. Some of these will affect you as a business owner, some will affect your staff, and some will affect both (also, you probably want to talk with your CPA about these). Consider these options, as it will benefit your taxes and ingratiate you to your staff.
#8 Understand the New Tax Bill and How it Applies to You
Love it or hate it, the new GOP tax bill is a behemoth of legislation that is sure to change at least a few things regarding your business. There are pros and cons for small business owners (and of course, the larger debate about whether it’s good for the economy), and regardless of your opinion, the most important thing for small business owners to do is to understand what’s involved. We did our own in-depth look on this blog post, and there’s still plenty more to learn and understand regarding the bill. The earlier you understand its implications — as well as which changes don’t take effect until 2019 — the better off you’ll be come tax season.
Smart Planning For San Rafael Small Businesses
After reading all these tips, hopefully you’re ready to start organizing for your 2018 taxes. If you need help, get in touch with me at Books In Balance. I invite you to take advantage of a free introductory consultation as we look ahead towards another successful year for you.
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