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How small businesses can prepare for tax season

Here's what to do if your books are a mess

Summary

If you don’t do your own taxes, find an accountant ASAP. Many will be close to capacity.

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If you dread tax time, you’re not alone. For many small business owners, the first few months of the year are a mad scramble to get their records in order to get them to an accountant on time to file. So, what do you do if you’ve kept less than perfect books (or not kept them at all)?

It’s not too late to make up for lost time.

Check out all the answers from our credit card experts.

Ask Elaine a question.

Unless you do your own taxes, it’s important to line up an accountant who has the bandwidth to do your taxes for you ASAP. Now is the time to reach out, as some accountants are already near capacity. Ask other small business owners in your industry for a recommendation.

Make sure you find out what information your accountant requires, so you have time to gather it. If you need any statements such as a balance sheet or profit and loss statement, some accounting firms may have staff available to help you clean up your books and create these documents. But if not, you may need to find a bookkeeper to help you too.

If you do need a bookkeeper, ask industry colleagues for a recommendation. Bear in mind that many small bookkeeping firms tend to get maxed out at this point in the year. Your best option, particularly if you run a complex business or have employees, may be turning to a company that has a team of bookkeepers who can fill in for each other if things get busy. Bench is one example. QuickBooks also has a program called QuickBooks Live, in which it can connect you to a bookkeeper to help you get your books in shape.

See related: PPP spending is not tax deductible. Now what?

If you have used a credit card you’ve set aside for business purchases, make sure to gather all of the statements to share with your bookkeeper. Most credit card companies allow you to download pdfs of your bills from their online portal. If you need to send them to your bookkeeper or accountant, using an encrypted email service can help to keep your personal information secure.

If it looks as if you will not be able to get your books in order, ask your accountant to file for an extension for you. That won’t absolve you from paying your taxes on time –make sure you do pay your estimates by your filing date – but it will give your accountant more time to file.

Once you’re done filing, take stock of how you did this year. If you ended up in a last-minute crunch, chances are you need bookkeeping help throughout the year. Many businesses have survived this year because of loans from the first two rounds of coronavirus stimulus packages. In today’s business environment, keeping good books is a competitive advantage. It is hard to apply for loans on short notice if you haven’t kept your books up and don’t have accurate records to submit with your application.

Final thoughts

If you’re on a tight budget, it is more cost-effective to hire a professional bookkeeper to do your books than your accountant, who will generally charge more per hour. Many accountants are so busy doing other work that they would prefer to get a nice clean set of books to work from anyway.

Also, make sure you’re set up to keep as much of your spending on business credit cards and through your business checking account as possible. Attaching them to your bookkeeping program can enable you to automate some of your record-keeping, which will reduce the number of hours for which you have to pay your bookkeeper.

Tax may never be fun, but if you keep your financial records in shape, you’ll be surprised as to how much less stressful February, March and April can be.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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