As a small business owner, one of the biggest sources of anxiety can be taxes. You drop off your financial documents to your accountant sometime in February, March, or even early April, and then you just have to wait.
You finally hear back and – surprise! – you owe way more than you expected. Why does this keep happening?
At Patrick Accounting, we get this question all the time. The good news? It’s simple: without a regular process of working with an accountant throughout the year, you’re left in the dark. You might miss important deductions, overlook costly mistakes, or find out too late that you owe more than planned.
By working with an accountant regularly, reviewing your books, and planning ahead, you can skip the last-minute panic and stay in control of your finances. Ready to stop stressing about tax season and get organized? We’re here to help.
What Are Tax Surprises and Why Do They Happen?
Tax surprises occur due to unexpected changes or transactions that aren't normally part of your business activities, leading to unforeseen tax consequences.
This can happen for several reasons:
1. You're Not Working with An Accurate Set of Books
One major reason for tax surprises is not having a sound set of financial records. If your books aren’t accurate or up-to-date, it’s easy to miss important financial details that affect your taxes.
Without regular reviews of your finances, you might not notice changes like unexpected sales, rising costs, new hires, or losses, all of which can impact your tax situation and lead to big surprises when it's time to file.
2. Lack of Proactive Tax Planning
Another reason for tax surprises is not planning ahead. Many business owners only think about taxes during filing season, instead of having a year-round strategy.
Without regular financial reviews, you might miss changes like unexpected sales, rising costs, or new hires. These changes can impact your tax situation and possibly trigger some consequences.
Whether you made more or less profit in the current year compared to last, you must plan for what you need to pay the IRS and any state agencies. If not, you might miss out on tax-saving opportunities and end up unprepared for what you owe.
3. You're Not Talking to Your Accountant About Major Financial Decisions
Anytime you make significant financial decisions, you should discuss them with your accountant.
Actions like taking money out of a 401k, making investments, or buying and selling assets can have significant tax implications. You don't want to discover the impact of these decisions when it's too late to do anything about it.
Regular check-ins and advice can help you stay on top of your tax obligations, lessen stress, and avoid unexpected bills.
How an Accountant Can Save Your Small Business from Tax Surprises
So, how do we, as accountants, actually help eliminate these tax surprises?
Establishing the Right Routine
This includes consistent financial monitoring, accurate record-keeping, and proactive tax planning. By maintaining regular check-ins and forward-looking financial assessments, we can help you stay ahead of your tax obligations and avoid unexpected surprises.
Keeping Your Finances in Check Throughout The Year
One of the first rules for creating this routine is having a sound set of books you can rely on to make decisions. At Patrick Accounting, we recommend monthly reviews because things can change quickly.
By looking at your financials monthly, you can make timely decisions and adjustments based on what happened the previous month. This could be anything from unexpected sales to rising costs or changes in your workforce. By monitoring your financials throughout the year, you can anticipate what you’ll owe and plan accordingly.
Our goal at Patrick Accounting is to educate and empower you to make informed decisions so that you are aware of your business's financial status and can plan accordingly.
Staying on Top of Tax Law Changes
Tax laws are always changing, and staying updated is essential. A good accounting firm will receive regular updates from professional associations and journals about legislative changes, new IRS information, and court cases. This constant stream of information helps us keep you informed and prepared for any tax law changes that might affect your business. By knowing what's coming, you can avoid any nasty surprises.
Avoiding Expensive Mistakes
Proactive tax planning (as opposed to, you know, retroactive) involves regular communication with your accountant about any significant financial decisions that impact your business. This includes:
- Taking money out of a 401k
- Rolling over investments
- Buying or selling a home or piece of equipment
By having these conversations throughout the year, your accountant can provide a clear tax estimate and projection, and make sure that money is put aside properly. This means that you're always prepared come tax time and remain in control of your finances.
Leveraging Financial Statements and Tax Credits
Financial statements aren’t just for tracking income and expenses; they’re powerful tools for tax planning. By understanding your financials, you can take advantage of available tax credits and deductions.
Whether it’s employee tax credits, machinery credits, or R&D credits, knowing what’s available can significantly reduce your tax liability. A good accountant will help you identify and leverage these opportunities to lower your taxes and keep more money in your business.
Ready to Avoid Your Next Tax Headache?
Tax season doesn’t have to be a source of anxiety and unwelcome surprises. At Patrick Accounting, we understand the common pitfalls that lead to unexpected tax bills and know how to prevent them.
By working with an accountant regularly, you gain comprehensive financial oversight, stay ahead of tax law changes, and avoid costly mistakes. No more guessing games or last-minute panic!
Now that you understand the value of working with an accountant to avoid tax surprises, you might be wondering 'How Much Do Outsourced Accounting Services Cost?' Learn more about what you can expect to pay for these services and how they can fit into your budget.
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