You hate this time of year. You hate that the holidays are over. You hate the cold and the snow. You hate the airport delays, the school closings and the power outages. You hate the dark mornings and the grey afternoons. You hate Hollywood awards shows. You hate football hype. Oh, and you hate paying taxes.
Every April I have to file my tax returns. And so do you. We hate that too. I hate that more than 30% of my income goes to various governments. I hate writing big checks. I hate making estimated payments for money I haven’t even made yet. I hate that I’ve already spent the money I made last year.
But we’re resigned. We know that taxes, like a space war blockbuster movie, are an annual occurrence. There’s no avoiding either. What I’ve learned is to treat taxes like I treat any difficult business transaction: do it fast and get it over with as painlessly as possible. How can you do this? Here’s what I do.
Be very, very organized.
During the year, don’t throw everything into a drawer, saying “I’ll worry about that later.” Come up with a file system and stick to it. Use an online document storage system like Citrix Sharefile and take just a few seconds to make sure your invoices, receipts, agreements and other paperwork is scanned and stored in the appropriate place there. Integrate it with Citrix RightSignature so that every time a quote, proposal or agreement is signed it automatically stores the document online. This way your accountant can easily access the data and you don’t have to give yourself headaches this winter chasing down paperwork from a year before.
Speaking of your accountant….
Accountants call this time of year their “busy season” but the fact is they don’t get really busy until February because most of their clients need the month of January to gather and send in all their stuff. So for them, January is kind of slow. Take an hour, meet with your accountant and review your most recent internal financial statements. Use this meeting to adjust your final estimated payment and talk about some tax planning moves for the coming year. Then make a date again to meet in May to track progress. Yes, it’s OK to drink heavily during these meetings.
Pay in your taxes.
You hate this. I hate this. But just do it. After you’ve met with your accountant make sure you’ve paid in all the estimate taxes you were told to pay. Grit your teeth. Clench your bowels. Sign the check. Then move on and run your business. Don’t play games here…the house always wins.
Wait…there is something you can do about 2016!
Check with your accountant, but know that you can probably make one final retirement plan contribution for 2016. Employer contributions for 2016 to company 401(K) and other retirement plans aren’t due until April 15, 2017. If you’ve got excess cash you can still claim a deduction. Sure, it’s money you’re paying out but it’s going to help your employees and, if you’ve got an account some will be earmarked for your retirement too (assuming you don’t die of stress before you reach 59 ½ years old). Talk to your accountant about this one – it’s pretty much the only move you can make after the year is over that still affects the prior year.
Re-visit the IRS
Yeah, I know…you’d rather read Shakespeare than an article about taxes. But you’re reading this one, right? Hopefully that’s because you’ve realized that your taxes are likely your number one business expense and you’re determined to minimize them as much as possible. Or you just enjoy bad writing. Whatever the reason, open up a new browser window and to go the IRS’ subscription site. Yes, it’s as boring as you expected. But you may be surprised at how helpful some of these newsletters and updates can be. Once you’re receiving basic tax tips via email you can forward to your accountant and ask questions. The smartest business owners I know do their best to understand the tax laws that affect them so that they can actively engage with their tax advisors.
These are five ways to make your tax filing season a little easier and to better position yourself for 2017.