Friday, June 22, 2018
Business

Prepare now for shortened tax filing window for small businesses

The Internal Revenue Service is delaying the acceptance and processing of tax filings by at least two weeks, shortening the window for filing taxes and potentially leading to delayed returns. The shortened tax season has many accountants and small business owners scrambling to adjust their plans for tax preparations. However, this situation can be an opportunity to adjust your accounting practices so tax time is less stressful. If you make the right moves, you can not only file your taxes on time in a painless manner, but you can also improve business processes and prepare your company for any future challenges thrown your way.

What does the delay mean for small businesses?

The tax process is already complex. Let's take a look:

Step 1: Businesses need to get ready for the end of the year. They need to gather all supporting documents and create their 1099s and W2s.

Step 2: Even if you have the right accounting systems in place, small businesses need to reconcile their financial data and/or prepare it for their accountant.

Step 3: Once you gather the information and meet with your accountant, you need to address issues like expenses, deductions, depreciation and more.

Step 4: Add in new tax laws and the impact of tax credits in the health care law, and you've just added even more complexity to an already complex process.

Clearly, taxes are "taxing," but if your financial information remains in legacy desktop software, this tax delay could hurt. If you are using desktop software, consider all of the complexities I've mentioned and now throw in an additional Step 1.5: Your data resides in multiple different applications, on multiple machines, so you need to spend countless hours manually tracking down, gathering and collecting the information. Additionally, this time-consuming and costly process is now reduced by two weeks.

Don't stress, though. Here are some tips that can help you get those taxes in on time.

1. Talk to your accountant — now.

Many people gather their financial data before talking with their accountants, but the process should be reversed. Speak to your accounting professional now and learn what information is needed. What information is missing? Can he make a general prediction about what you owe, or what will be returned to you? And definitely plan ahead. There is no tax planning in January. It needs to be done before year-end.

2. Create a tax-filing plan.

When does your accountant need information to file? What information does he need? How can he receive it, and how will the accountant be able to access it?

3. Give your accounting professional access to information.

If your information is in the cloud, this is easy: Give your accounting professional a login so he can quickly and easily find relevant information.

Or, if your financial data is on a desktop or in filing cabinets, just hand over the keys to your office to your accountant — and a hefty check.

It's important to lower (or remove) the information access barrier for your accounting partners, because the more time they have to spend driving to your office and manually digging through your hard copy and various desktop files, the more hours they will have to bill and, of course, the more they will cost.

As part of your tax-filing plan, make sure you have your information ready and available. This keeps them in the conversation all year, not just at tax time.

4. Prepare for next year right now.

Technology today can make tax preparation faster, smarter and conducted with more confidence tomorrow.

If you update your processes, you can manage your 1099s with just a few clicks rather than going blind trying to track down and sort the data (just one of many examples where technology can improve productivity).

The effort you spend now pays dividends not only in completing the tax requirements for this year, but gives you time back each week and saves you money overall from having to find and fix end-of-year errors. More important, it can give you insight into your business day to day and save you money.

Once you have moved your accounting and billing information into the cloud, tax deadlines are easier and more affordable.

No matter what changes the IRS, partners or customers toss your way, your business will be prepared for anything with the right technology. Here's why:

1. Visibility for you and your business.

Information in the cloud allows for instant and consistent reconciliation on accounts receivable and accounts payable and provides critical details on exactly how much you spend. Most cloud accounting software automates and integrates various billing and accounting aspects of a business, giving you a real-time view of financial details on a daily, rather than yearly or quarterly, basis. And all of this information is at your fingertips, minimizing time spent hunting down and entering information.

2. Visibility and collaboration with your business partners.

With the right technology, you and your accountant can work off of the same set of data, saving countless hours and dollars on time spent by accountants tracking down your information. Financial data and documents that are stored in the cloud can be accessed and viewed with one login, offering accountants an accurate view of real-time financials so they can easily maintain the pulse of a client's financial health and eliminate surprises.

3. Connected systems and packages.

When financial data and apps reside in the cloud, it is easy to transfer and integrate data and files to create a trial balance.

You and your accountants can hunt down 1099s and financial reports with just a few clicks and easily hand off data so your accountant can do your tax return.

Jody Padar is a partner at Xero and the chief executive and principal of New Vision CPA Group.

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