Thursday, November 12, 2015

You, Your Bookkeeper, and Small Business Tax Preparation

I’m a bookkeeper, not a tax preparer, but that doesn’t mean I don’t have a role in my client’s tax preparation each year. I save them a ton of time getting ready for small business tax preparation. As we approach year-end, it’s time to start getting those files ready for the poor soul who has to do all that tax work.

Just kidding! Two of my best friends are CPAs! The thought of doing a 1040—even my own—frightens me on a deep, dark level. But I greatly respect the people that do it every year: they’re hardcore. The 300 hour work weeks, dealing with the clients that are upset with a return because it wasn’t what they “envisioned,” having to deal the receipts-in-a-shoebox or difficult clients….


As a bookkeeper, part of my job is to serve as a translator between the tax preparer and the client, and to make small business tax preparation as painless as possible for everyone!

If you’re a small business with a bookkeeper, take advantage of your bookkeeper’s “translation” skills to help you with your small business tax preparation. Here’s how:

1. Introduce your bookkeeper to your tax preparer

Do this as soon as possible, so they can coordinate on how to handle certain things. Will they do quarterly reviews together? Will the tax preparer want to make periodic adjustments throughout the year, or just at the end? Who will enter these year end adjusting journal entries? Who’s going to prepare the 1099s? The smoothest (and quickest) tax returns to process for our clients are those where we have a great relationship with their tax preparers.

2. Stay up-to-date

One of the biggest advantages of outsourcing your small business bookkeeping is that your records are always up-to-date. Accounts are reconciled, income tracked, and expenses recorded. Make sure you’ve given your bookkeeper access to all pertinent documents and information, like credit card and bank statements. If you do part of the bookkeeping, are you up-to-date on your end? Keep up your end of the bargain, so that your bookkeeper can do his or her job.

3. Share Documentation

Another part of small business tax preparation is record-keeping. The IRS requires that you keep proof of your income and expenses, and us bookkeepers can help with this by setting up all of your back office processes. We have lots of options for this—Dropbox, Box, Google Drive, or even by attaching documents directly to transactions in your accounting system. No more shoeboxes filled with wrinkled, coffee-stained receipts!


4. Outsource your Payroll

Payroll tax compliance can be a struggle. Most small businesses outsource their payrolls, and for good reason: statistics show that 40% of small businesses incur an average of $845 per year in IRS penalties related to payroll. The IRS and most states required that you file payroll reports, and any remaining quarterly payments.  Your bookkeeper, whether managing payroll or not, will make sure that your books tie into your returns and your W2s before passing them along.

5. Don’t worry about Sales tax

Another area where small businesses struggle is dealing with Sales Tax. Understanding nexus and compliance—accurately calculating, collecting and remitting payments and returns—is a vital task for many small businesses. Avalara and TaxJar are my two go-to apps for sales tax. My clients get the peace of mind that it’s taken care of, and their tax preparer gets beautiful, easy-to-read reports that tie directly to the books.

6. Find anomalies

If you haven’t been using a bookkeeper, and your year-end is way off from last year’s and you can’t explain it, you might want to find a bookkeeper to help identify errors in your process. Why isn’t this adding up right? is frequently the reason a client reaches out to a bookkeeper. Finding the needle in the haystack, a service our firm calls QuickReview, is the common reason many companies decide to outsource their bookkeeping.

Small business tax preparation doesn’t have to be a drag. Well, except for the part where you pay taxes. But the thing is, if you outsource your bookkeeping or rely on a professional, it’s a breeze.


The post You, Your Bookkeeper, and Small Business Tax Preparation appeared first on Fundera Ledger.

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