If you are anything like me, the holidays being only days away also signifies that tax season is barreling towards us like a freight train. There is no stopping that bad boy! Most people stave off preparing for tax season until after the holidays, but I would posit this just elongates the season of stress. Here are the top five things you can get going to help relieve the stress and pressure of tax season:
1. Get your books in order!
Really, this is something you should be doing on a weekly or, at least, monthly basis. Better yet, have someone else handle this non-income producing activity for you. However, since I am solidly rooted in reality, I understand a lot of you wait until you absolutely have to do it,which is somewhere about a week or two before the tax deadline. Don’t do this to yourself! Get started now or find someone who can help you get that in order and then keep you straight throughout the next year.
2. Prepare to issue 1099’s.
This is much easier to do when your books are in order so that you have a total of what you have paid your contract labor. Furthermore, 1099’s are required to be filed and sent to the contractor by January 30th of every year. In a perfect world, you hire a contractor and withhold their first check until you have certain things in place, like a W9. Again, the reality of it is that most of you aren’t doing that and waiting until January to collect that information. This can be a VERY time consuming and frustrating process, especially if the people you hired do not want that income reported,which has to happen if they make more than $599 during the year. If you aren’t able to get the information before it’s time to file those 1099’s, you must show that you made good faith efforts to retrieve that information from the individual if you are going to take it as a tax deduction. If this last part doesn’t happen, the IRS expects you to pay the taxes on that money and they do that by disallowing the deduction on your taxes.
3. Contact your tax professional.
In our office we are almost complete with our annual reviews with ourclients. We do this so that the client scan adjust their estimated taxes or spend some money to mitigate taxable income. I generally recommend bonuses to employees or the purchase of assets. We are also looking at what can be done differently in the upcoming year to expand upon the current year or adjust for things that were not desirable. While we initiate those conversations with our clients, most firms do not and it’s up to you to be proactive and call your tax professional, preferably a CPA or EA(enrolled agent) to help get that party started.
4. Consider your business structure.
Since you are already going to meet with your tax professional, part of that conversation must include business structure. Business structure drives how you, as a small business owner, are taxed on the profit of your company. However,it’s a complex decision to make and one that should be made with a professional’s help. I have had many people come into my office and tell me they want to be a certain business structure because another business owner told them that’s what should happen. Most often then not, that really isn’t the case and it’s not a good for for the client at that moment in time.
5. Educate yourself on how the new tax law reforms will affect you!
Many changes took place effective for 2018 and more changes will take effect in 2019. It’s really important that you speak with your tax professional about how these changes may affect you. While we can never give guarantees that things will work out the way we think they should, this year (2018) is presenting particular issues in our powers of prediction as a direct result of these reforms, but we can get you in the ballpark!
A direct correlation to being prepared and reduction in stress have been pointed out by numerous studies. There are two very stressful times of the year: The holiday season and tax season, which happen consecutively. So, be prepared, get your numbers in order and talk to your tax professionals to eliminate the stress of not being prepared and going into tax season blind.