Small Business Taxes Best Practices: What are your 3 tips for filing end-of-year taxes?

1. Talk to your tax professional BEFORE Dec 31 while you may still be able to make adjustments.
2. Make a list of significant transactions and financial events so you will remember to discuss these items.
3. Make a list of significant changes and plans you have for 2011.

1) Review your books for the year in late November or early December, make notes about significant items or questions, and make sure the first two reports your accountant will review look legitimate (probably your Balance Sheet and Profit/Loss reports).

2) Discuss these notes with your accountant before Christmas to make sure you avoid having "surprises" in March or April and give yourself a week to make year-end tax moves. Lot's of businesses have staffing shortages or nearly close down the last week in December, so making moves on major purchases should be in the works before Christmas.

3) Don't make purchases just for the tax write off. Don't rack up debt to avoid paying Uncle Sam. Your tax moves need to make economic sense as well, but depending on your tax bracket, it's tempting to buy when everything is nearly 50% off!

1. Think of your tax professional as part of your team.

2. Be timely and accurate without loosing site of the bigger picture

3. Start planning for 2011 on January 1!

1. Get a good accountant who cares and is truly competent.

2. Get good systems which mean it's easier and no effort to produce the annual financials and supporting information.

3. Do it early!

Here are my three tips from the view of CFO working with the CPA for tax planning:

1: Do your year end income and expense forecasts for the year in September. Ask yourself, based on your history and current pipeline, is it realistic?

2: Review your findings with your tax preparer in September. This allows your tax preparer the time to evaluate the tax consequences and gives you three months to strategically take action to minimize the tax without just increasing expenses for the sake of lowering profits.

3: Put aside the cash for your tax payment early so that you have the money when March 15th/April 15th arrives. Even though you may extend your return, if you are going to owe tax, the estimated payment must be made on March 15th for C corps and April 15th for pass through entities.

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These tips are strictly about reducing your chances for an audit.
By the way; I heard an IRS agent referred to (returns picked for audit) as "inventory". The cynical side of me likes the use of that phrase, so I'm going to use it from now on:
1. Have your taxes done by a paid preparer. Statistically; that signature at the bottom reduces your chance of being audited. But take note! If you choose a bad preparer, your chance of audit will increase, based on their signature. Agents know which firms provide the best inventory, especially if it's a national firm.
2. Make sure there are no math errors on the return or supporting schedules. If you use a tax program, it will do most of the math for you. But if you could still have errors on supporting schedules, like a Schedule D continuation sheet, or an appraisal for a large donation.
3. Go on extension: Historically; returns filed after April 15th are added to 'inventory' less often. Technology may be bringing this statistic down, so I listed this point last.

Have a merry Christmas and a happy tax season!

Anthony C. Gruber, CPA
President, Viser Business Tools
www.SmallCompanyTools.com
www.GruberCompany.com
www.401kTest.com

I agree - you need to stay in touch with you accountant throughout the year - not at the last minute!

Top 3 tips:

1. Don't leave it until the last minute, most accountants/tax accountants can offer genuine help but only if you let them get involved early, I always find looking at the accounts/financial statements at the end of the 3rd quarter (9 months).

2. Don't assume, speak with your advisers in advance of doing something, its no good saying in 30 minutes I am signing XYZ agreement, inform your adviser in advance so they can look at the 'tax angles' of everything that is substantial that you do.

3. Honesty, be honest with your advisers, treat them with respect and do not expect them to do something just because you want to, bullying will lead you to using an adviser that is less than you deserve!

-Have your chart of accounts set up with categories useful to your tax person. Things like separating out meals from travel, owner health insurance from employee and penalties from state tax payments will make the tax process faster for the preparer. Have your tax person go over your chart of accounts with you at the beginning of the year, so that you are collecting the information they need as you go.

-Write down your car's odometer reading every Dec.31st or Jan. 1st so that you know the total mileage for the year, and keep good contemporary records of business mileage including where you went, why you went there, and who you met or what you did. You can note this on a calendar, keep a spreadsheet, or even get a smartphone app that calculates the mileage for you using GPS! $5.10 for every ten miles adds up over the course of the year.

- Don't take action based on something you heard on the news or what your friend's brother told them. Not all advice is applicable to all situations. To listen to the hype, you would have thought that everybody should run out and do Roth conversions, when actually this was not beneficial to many people. Ask your tax person about any business moves that you're planning to make, so they can tell you how your taxes will be affected based on your own individual situation.

The U.S. tax code is extremely complicated which is why many small businesses, home-based businesses and individuals make mistakes in their accounting, record keeping and filing of their tax returns. It is so important to work with a professional that understands the rules.

The IRS has many allowable legitimate business deductions for business owners. It is to the business man or woman's advantage to take full use of all legitimate business deductions and/or credits. This is your right! You need an aggressively safe tax preparer, one that knows what the rules are.

Planning is a key approach to keeping most of your hard earned dollars in your pockets vs. Uncle Sam’s. Start planning immediately to avoid costly mistakes later and maximize your deduction power to reduce your tax liability.