“ It is impossible to be sure of anything but Death and Taxes.”
Christopher Bullock, The Cobler of Preston – 1716
Taxes are indeed an inevitable part of our everyday life. Saving money on tax preparation should be a primary concern of any small business owner. Sure, you can use a discount service to prepare your tax return, but, in the long run, that is probably going to cost you dearly. A certified public accountant may charge a higher fee, but the savings that you will realize because of their extensive knowledge of tax law will far outweigh the initial cost.
Fortunately, there are still ways that you can adequately prepare for tax season that will save your accountant time, thereby saving you money. Here are the top five ways you can save money on tax preparation and reduce your overall accounting fees.
Save money on tax preparation by making your accountant aware of any life-changing events that may have occurred during the past year.
As we progress through life, our tax burden changes. The different stages of our personal journey may include things such as marriage, having children, sending those children through college, and retirement. Your small business also goes through changes over time. Things like company structure, number of employees, products sold, and services rendered may be different depending on what stage of life your small business is in.
Each one of these events has ramifications when it comes to tax calculations. It is vital to keep your accountant informed of any changes that may occur throughout the year. Open lines of communication will prevent errors and reduce the number of hours that are required to prepare your tax return, saving you money. At Accounting Complete, we provide a yearly questionnaire to each of our clients to help us learn about these changes.
Save money on tax preparation by providing totals along with source documents if medical expenses are more than five receipts.
Maintaining accurate records during the year is a great way to save money by helping your tax accountant be more efficient. For example, a good rule of thumb is to have source documents and totals at the ready if you have more than five receipts that fit into the medical expense category. The more organized that you are, the less time your tax preparer will have to spend tracking down proof of your allowable deductions. Not only will this reduce the cost of tax preparation, but it will likely reduce your tax burden because you will have accounted for every expense.
Save money on tax preparation by waiting until you have received ALL tax documents before meeting with your tax preparer.
Employers, vendors, and customers all have different schedules when it comes to providing tax forms. Often, you may still be receiving these forms well into February. It will serve you well to make sure that you have all applicable forms before sitting down with your tax accountant. If you bring additional forms after your accountant completes your taxes, they will likely have to file an amendment. The extra time spent will result in additional charges. Also, failure to provide all of the proper forms could result in fines or penalties. Once again, having an excellent record-keeping system, and having a clear picture of your small business operations will help you avoid those unnecessary expenses.
Save money on tax preparation by having vendors complete a W-9 form before receiving payment.
Each year it is your responsibility to provide 1099 forms to each vendor that you have paid more than $600. If you do not furnish this form and you are audited by the IRS, you will be fined at least $500 per offense! Frequently this slips through the cracks since, many times, you may have vendors that you don’t use regularly. Our recommendation is to require the vendor to supply a W-9 form before receiving payment. Once the form is received, forward it to your accountant or bookkeeper immediately. Having this information will allow them to be aware of which vendors should receive a 1099 that year.
Save money on tax preparation by answering your accountant’s questions promptly.
Let’s face it. Time is money. If your accountant has to contact you 4 or 5 times to get the information they need, they are going to up your fees. Avoiding that increase is a simple process. Respond to your accountant’s question and provide them all of the information they need as soon as possible.
Having to wait for answers will have negatively affect your tax preparer’s workflow, and guess what, an inefficient workflow will always cost you more. If your accountant has more time to devote to filing your tax return, they will have the opportunity to be more thorough and they will be able to unearth more deductions and tax savings.
Everyone has to pay taxes and everyone likes to pay as little as possible when doing so. By implementing the procedures outlined in this document, you can significantly reduce the costs associated with this painful but inevitable task. By sharpening your focus on these issues, you will also help your accountant to be more focused on doing what they do best and that is putting more or your money back in your pocket!
Here at Accounting Complete, we have been fine-tuning our tax preparation systems for well over 20 years. The result is that we can provide the tools you need to make your small business not just succeed, but flourish. To learn more about how to put our superstar team to work for you, reach out to us, and schedule a free consultation.