Each year we know the March 15th deadline is coming and many small business owners are not ready to file taxes. And yet each year we must file an extension, hoping to not owe a ton on taxes. Sound familiar?
To get ahead of this, small businesses need a plan.
In any project planning, we look at the deadline and then create a timeline from there. What things must be done, by what date, to ensure we meet the deadline? When it comes to taxes, as with any project, start with the end in mind.
March 15th Deadline
First, let’s get a little technical- the March 15th deadline is for entities that are “S-corporations” and are required to file a separate tax return. Many small businesses are incorporated as an LLC, and if it is just you (a sole member LLC) then you file that information with your personal tax return on April 15. So you get an extra month- but don’t procrastinate- pretend your due date is March 15!
So, now that we are all using a March 15 deadline, we need to back it up and really state that it should be February 15 that our books should be completely wrapped up, right? Your accountant will want the books by then so they can do their magic to complete the return. This means that January is a pretty busy month for tying up the loose ends of the financial statements, reconciliations, etc. If we wait until then to do the entire year, we are going to start the New Year with a massive amount of work, and every New Year’s Resolution will be shot by mid-month!
My suggestion would be to work no less than quarterly (but that’s a good start) on ensuring your books are in shape. That means at the very least, banks and credit cards are reconciled in your accounting system (ie: all transactions are entered and coded to appropriate accounts). Then, December will just be the end of any other quarter, so January will just be reconciling, etc. and a much more manageable workload.
In December, I recommend that you take a bit of time to review your reports and information in your accounting system one more time before the end of the year. Do accounts receivable and accounts payable look correct? Run a Balance Sheet and look to see if there are any accounts that shouldn’t be there. If you are using QuickBooks Online, look for things like Undeposited Funds or Opening Balance Equity. Check to ensure all the balances are correct, and that you know what is in them. Accountants call that being reconciled or having a schedule for those accounts. If you do inventory, plan to do a count at the end of the year, too.
No Extension Next Year
Treating your taxes like any other project with a timeline of tasks will help you stay on top of the project and avoid filing an extension next year. And as a bonus, there will be less stress, you can start looking at your financials for your business throughout the year, and you might actually look forward to the new year!
If you want more advice on how to manage the accounting processes in your small business, contact Carla.