This sounds crazy, but it’s really not a bad idea to start thinking about your 2014 taxes, the one due in 2015.
We know that you’re probably just over thinking about your 2013 income taxes. It may seem odd to start thinking about 2014 taxes just now, but actually, this is the ideal time to start planning and making business decisions, keeping their tax implications always in the back of your mind.
As you look at the data that will be entered in your 2013 tax forms, you’re likely to come across some expenses that you might have handled differently, or some income that should have been deferred. If you begin your planning process for 2014 while 2013 is still in the works, you can start making smarter, more tax-advantageous business decisions now, instead of late in the year when everyone is rushing to take actions necessary to lower their tax obligation.
Overhaul your Chart of Accounts.
The mechanics of doing this are fairly uncomplicated, but changing this critical list – the backbone of your company file – requires solid knowledge of which accounts should be added, deleted or changed. You also need to know which accounts and sub-accounts will have impact on your income taxes. They must be structured accordingly.
Devise an effective system for estimated taxes. As you well know, there’s no magic formula for estimating how much income tax you’ll owe until all of your income and expenses have been tallied. We can make this an ongoing task by creating monthly or quarterly financial reports for your business and working from those.
If you’re self-employed, you might want to open a low-fee checking account that will serve solely as your tax fund. Because you have no employer to pay a portion of your Social Security and Medicare obligations, it’s critical that you’re putting enough away. Consider putting one-third of your taxable income into that account and see how it goes. You may get a pleasant surprise at tax prep time, or you may have to dip into other savings to be compliant.
You can submit federal payments online on the Electronic Federal Tax Payment System site. Check with us to see if your state has an electronic system. Of course, the IRS will also accept a check.
Run reports on everything. And keep running them. We already mentioned that we’re happy to create and analyze your most critical financial reports on a regular basis. You may have tried to understand the Trial Balance, Statement of Cash Flows, etc. in QuickBooks and been puzzled. Don’t feel discouraged if you don’t understand these reports and how they apply to your business. Your accountant can help you with that.
As the 2013 tax season starts to wind down, we love to talk to businesses who already want to think ahead, so give us a call.
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Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.