For both individuals and small business owners, 2020 year-end tax preparations may look a bit different from previous years.
The IRS extended the 2020 tax deadline to May 17th in response to the direct and indirect consequences of the COVID-19 pandemic. Programs designed to help businesses survive the pandemic, like the Paycheck Protection Program, provided much needed relief. But, they also mean a more complex filing process for business owners and their accounting partners.
Here are six things small business owners should do right now to prepare for May 17th;
One of the first things you can do is ensure your business records are complete. Track these important documents month by month to make sure you have them all readily available for your accounting partner if you’ve changed accountants in the last year, dig up a copy of your 2019 tax return to have on hand for your new partner.
Now is also the time to reference your accounting software and see which invoices are still outstanding. It might be the most daunting item on the list, but following up on these owed payments is a necessary evil to get your account in order.
Just like spring cleaning, checking inventory helps business owners feel less anxiety and breathe a sigh of relief. This step can also help you prepare your inventory for next year (goodbye, expired products!) but may also help you uncover any inconsistencies you may have missed from the previous year.
The tax filing deadline is an important date to know, but it’s not the only date. You can reference the IRS website for other important deadlines including:
Good housekeeping is important, but checking in with your financial partner, whether that’s an external accountant, bookkeeper, or fractional CFO, is extremely important, especially during tax season.
Starting to check in with your accountant early can save future headaches or scrambles for unknown missing documentation. Trust us, they will appreciate an earlier heads-up, rather than an urgent phone call a few days before the tax filing date.
By working to submit your return early, you can have peace of mind that you won’t potentially run into last minute problems and avoid those pesky late penalties. Even better, you can start planning for advisory services from your accounting partner to have an even better 2021!
No one enjoys year-end taxes (though we would LOVE to interview someone who does), but by following these steps you can at least make the process less frustrating. The best way to work with the accountants and bookkeepers in your life is to start early and spend a bit of time each month staying on top of small processes. Even just a few hours every Friday will save you a headache in May.
Figure out where you can automate some of your financial processes and always check in with your accountant to help your small business maximize financial advice and services so you can concentrate on what’s really important - your business.