Guest Post: Top 5 tips to avoid year-end tax chaos
This is a guest post from Emerald Raynott, who runs Cogneesol. She is described (in this post) as a blogger, geek, sports enthusiast and the girl behind marketing Cogneesol, a well-recognized company offering accounts payable services and accounts receivable services to small and medium-scale businesses across the globe.
Towards the end of the year, the small business owners are looking to get their books in order for ensuring that the tax return preparation process goes along smoothly. During the earlier months of the year, the higher management of small businesses is so engrossed with operational activities that they hardly have time to pay attention to such tasks. In order to ensure that there is no last minute chaos, the following tips can be followed for ensuring that the taxation process is completed without any mistake:
- Delay your payments – Incomes which are to be received towards the end of the year can be deferred to a date early next year. This can help in lowering the tax returns for this year for small businesses. But you need to keep in mind the expected income for the next year. In case you are expecting more income next year and there is a chance of your income entering a hiring tax slab, then this strategy will not be appropriate. So you have to carefully look at the incomes in the current year and the expected incomes next year, before making such a move.
- Ensure proper document management – Proper management of significant financial documents like receipts, bank statements, deposit slips etc. is essential for smooth tax return preparation. HubDoc is an excellent option for managing huge piles of financial documents. It is a web-based device-powered document repository and acts as an automated document aggregator. This software reduces the need to scan and upload the documents manually.
- Outsourcing tax preparation services – Outsourcing the tax preparation services to third party organizations based in developing nations like India is also a good option. By hiring their services, a small business will not require to invest in time and infrastructure for this purpose. Only thing you need to keep in mind is sending the required information well before the due date to help the outsourcing firm in performing their tasks efficiently. The remuneration charges of outsourcing firms are also lower than local rates.
- Proper Budget Management – Instead of following the real time planning and budgeting strategy, you should prefer a planned budgeting strategy. This will help in achievement of financial goals in a systematic manner. Using software like QuickBooks can help in making the right projections related to budgets. This will also help in the tax preparation process, as you will be well aware about the expenditure incurred and the income generated.
- Keep an eye on the flexible spending accounts – Flexible spending accounts are fringe benefits which many companies offer to their employees in cases of urgent requirements like child care or medical bills. The benefit of these accounts is that money spent is not taxable. By not maintaining information regarding these accounts properly, you might end up paying more tax than you owned. To lower the current tax, you can also include next year’s estimated flexible spending in the current year with the permission of the concerned employee.
All these tips have been mentioned for the benefit of small business owners to help them in avoiding year-end tax chaos. But it is up to the higher management to decide what is beneficial for the organization.
