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Things You Should Consider Doing Before Tax Season

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No one likes Tax season, but it has to start, and even startups that aren’t making money must file returns on time. Businesses worldwide have already started giving out tax forms and collecting receipts and financial statements, which all take time that CEOs of new businesses could spend growing their businesses.

No matter how big or small your business is, it would be best if you gave yourself plenty of time to prepare for Tax season. Your taxes won’t hurt as much if you do a little work to prepare for them at the end of the year. The experts at Countick put together a list of tips and things to do to help founders with their taxes.

1. take a look at your money

Answer any questions that are left. Clean up any expenses that aren’t in a category. If your accountant or controller had any questions for you in 2021, you should answer them now. In January, you’ll have a lot of real work to do, so make sure your finances are ready for a clean end of the year.

2. keep a reserve of your estimated tax bill

The tax due date is red because it’s a business expense; all expenses are red, and all income is green. After proper tax planning, every business must set aside enough money to cover its estimated tax bill. Businesses can pay less tax on their extra income by using qualified plans like profit sharing and defined benefit plans.

3. look at your chart of accounts

As a business grows, new categories of income and expenses often appear. At the end of each year, you should go over your chart of accounts with your CPA to ensure everything is categorized correctly, and you can take advantage of any available deductions.

4. prepare ahead of time to avoid tax liens

Get your finances in order before tax season, but more importantly, know your tax obligations so you don’t get caught off guard. If you can’t pay the bill because you put money into growing your business, you’ll have more time to find financing. If you don’t pay, you could get a tax lien, which makes it much harder to get business or personal loans (though it’s still possible).

5. record of revenue report by state

Get your reports on sales by state ready. For apportionment, your tax preparer needs this information so that your state returns can be done right.

6. make significant investments that you can write off on your taxes before the end of your fiscal year

Be sure to make any significant investments before the end of the year. Deductions are your friend when it comes to filing taxes, so if you’ve been thinking about getting new tools or supplies, now is the time to do it. Don’t waste the government-approved exceptions for businesses. Before the end of the financial year, think about making upgrades or capital investments.

7. get the facts about your business

Check with your tax preparer about the details of your business. Make sure your tax preparer knows if your business has moved, changed its fiscal year, or changed its name.

8. be sure to keep good records

You must show that you’ve paid off all of your debts. That includes taxes paid by both the employee and the employer. Instead of scrambling to find money at the last minute, pay them as you go and keep track of it. Keeping things straight with the IRS will be much easier if you get them on track. If you don’t want to go to jail, you don’t want the IRS working on your case.

9. state your income and expenses clearly

Make sure your records are good. When tax time comes around, you’ll be better prepared if your files are neat and complete. You need to be clear about what you make and what you spend. But the best thing you can do is set up a time to meet with your advisor and plan your taxes well before January. In November or December, you should have a good idea of how much tax you owe.

10. start making plans now for the next tax season

By the time you have to file your taxes, most of your chances to plan will have passed. No more time. It would be best if you started planning during the last fiscal year when you could still change things like employee benefit plans, contributions to retirement plans, and capital spending.

11. updated employee status

Make sure your employees’ vital statistics are up to date by having them check with your payroll provider. People move, change their names, etc.

12. get forms W9 and W8-BEN

Get W9s from your contractors and W8 BENs from your international contractors.

13. get ready for tax credits for research and development

Be ready to give an estimate and back it up with proof of how much time your engineers spent on new research and development. Need to learn what this is? By doing an R&D credit study, unprofitable startups can often cut their burn rate by up to $250,000 annually. That’s a massive drop in spending money. You can find out how much money you can save by contacting our online experts’ at 

14. get the financial records of your foreign subsidiaries ready

Your tax preparer will need them to fill out your 1120 tax return with Form 5471. Tell your international accountant what’s going on right away. Watch for your Foreign Bank and Financial Accounts (FBAR) report. If you have bank accounts outside of the country, you need to tell the government, or you’ll have to pay hefty fines.

15. plan for taxes all year long, not just in the spring.

Pay your taxes and thoroughly review your cash flow projections every quarter (every month would be better) so you can pay your tax bill on time. If your business has a tax lien, you won’t be able to get loans from many good, low-cost lenders. Before making a big purchase or investment, make sure you won’t need the money you have to pay taxes tomorrow.Consulting can make tax time even more manageable. Connecticut’s team of experts gives you the best and fastest service so you can manage your tax season more effectively. Contact us now to get the best service for you.

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