Nobody in the history of ever has described self-employment as being a walk-in-the-park endeavour. Even for those who have not experienced what it is like to be self employed or the owner of a small business, countless movies, books, and other sources of media have made it quite clear that, at least in the early stages, it is quite the grind. This is not to say that it does not have its own advantages. Over the years, we here at Accounting Solutions Ltd. have worked alongside plenty of clients who have managed to thrive in their solo ventures, many of which cite the freedom and sense of accountability that comes with their career choice as being a positive contributor towards their entrepreneurial well-being.
Even the most experienced small business owners may find themselves in a heap of trouble when tax season comes around, however. With so much going on in terms of inventory, potential staffing, and all the other ins and outs that come with the territory of self-employment, it can be quite easy for one to neglect the importance of properly filing their taxes when April 15th creeps around the corner. Despite their fun sounding name, the Internal Revenue Service (IRS) mean business, and a misfiling or audit can lead to the downfall of those who are not careful. Here are some tips to make sure that this isn’t you:
Deadlines: They are called ‘dead’ lines for a reason. Be very wary of upcoming due dates, mark your calendar down, leave yourself reminders, whatever it takes. The penalty for filing or paying late on a personal return is up to five percent per month. If you wait five months, this compounds to a quarter of what you should be getting back. Missing deadlines can be costly, and can even lead to the destruction of your singular venture.
Talk To Us: If you have made the decision to hire a CPA to help you out with your finances, make sure that you communicate with them regularly. Although we do try our very best to understand our clients business practices so as to make the proper filing decisions, it can be too easy for a miscommunication to lead to a big mix up. If the taxpayer is making a estimated payment without contacting their CPA, this can seriously corrode the flow of things, leading to a lot of extra work for both parties.
Help Us Out: Accountants are human too. If you plan on handing us a box full of receipts, you should probably expect the filing to take a lot longer, and be a lot more costly, than if you help us out by determining which format of information suits us best. This goes full circle to the aforementioned point – communication is key, and by collaborating with your CPA and understanding which information we require and the best way to provide it, you can hope to contribute towards a successful and efficient working relationship.
Pay Your Estimated Taxes: All of the concerns that we have expressed throughout this article compound into this final point. By failing to pay your estimated taxes with estimates equal to at least 90% of the current year’s tax or 100% of the previous year’s, you are putting yourself in a vulnerable position. The IRS is exceptionally good at what they do, and by missing these estimates, you can expect to be handed a large bill. The last thing that any self employed business owner wants to do is have to negotiate an installment agreement with the feds while also trying to keep their enterprise from going into further arrears.
Self-employment is definitely not easy, and neither is the dissection of one’s financial statements for filing purposes. Fortunately, talented CPAs such as ourselves are always ready to help. This tax season, make sure your money is going to the right places, plan ahead, and give us a call if you have any questions or concerns.