If you filed an extension for 2020 business taxes, you probably just closed the door and breathed a sigh of relief. However, 2021 is nearing the end, and tax time will be here again before you know it. If you find yourself and your business in a reactive state, it may be time to try something new. For that reason, Edgewater CPA Group reveals how to take a proactive approach to business taxes and bookkeeping.
If you are a very small business with minimal transactions, you may get away with weekly touchpoints. For everyone else, we recommend keeping accounts updated daily. It’s common to process a transaction with complete confidence you’ll remember the details at month’s end, only to forget. Updating the books or accounting software daily provides a deeper insight into your financials, which reduces the risk of errors and unpleasant surprises. If you don’t have the capacity, use professional bookkeeping services.
Keeping up-to-date transactions and receipts is excellent, but not quite enough. To make the most of deductions, detailed and documented records are critical. For instance, next week, or even next month, you may not remember that you drove 52 miles for lunch with two prospects today. Mileage, in particular, requires accurate record keeping. Plenty of tools exist to help track, record, and monitor these events, but you’ll need to implement and use them regularly. The two minutes it takes to record it at the event saves hours trying to piece it together at month’s or quarter’s end.
An example of a reactive business tax approach is to file an extension to give extra time to pay. The truth is, filing an extension doesn’t simply kick the can down the road when it comes to payment. Instead, it means you accrue interest and penalties. If you do decide to file an extension, make the tax payment anyway.
A better method includes creating a business tax strategy and executing it well. At fiscal year-end, it’s challenging to capture deductions and credits that may have been previously available. Instead, sit down with a professional seasoned in tax strategy and preparation to develop a plan that works for your business. Additionally, leveraging a professional financial services expert provides access to the information you may not have, such as time-driven deductions and credits and recent legislation. Finally, many providers now bundle professional services, providing a menu of services at bundled rates.
Labor issues, supply chain challenges, government policies, and economic indicators present enough challenges. Edgewater CPA understands that business owners should spend their time running their business without encroaching issues derailing them. That’s why we support companies in Carmel, Evansville, Indianapolis, and Fort Wayne. Could your business use a little support? Give us a call at (317) 207-9269 or schedule a consultation online.
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