3 Tax-Time Worries of Small Business Owners

Natalia Autenrieth In her professional lives across the United States, Natalia Autenrieth, CPA has audited Fortune 500 clients as part of a Big 4 team, built an accounting department as a controller of a large hospital, and served as a CPA consultant to municipalities. Today, Natalia coaches in the financial industry and writes about business finance, financial technology, and personal money management. Her ghost-written articles have appeared in thought leadership and expert blogs, as well as Kiplinger and Accounting Today. Read more about Natalia and her practice at www.AutenriethAdvantage.com.

3 Tax-Time Worries of Small Business Owners

As rewarding as running a small business may be, it comes with its share of headaches. According to the recent research by SCORE.org, 40% of business owners agree that bookkeeping and taxes are the worst part of their owning a business. More than half of them (58%, to be exact) report that they spend upwards of 40 hours per year taking care of these annoying administrative tasks.

A full week or more of productivity lost should at least buy them the peace of mind, but sadly that is not the case. As we enter the Fall months, most small business owners begin to worry about taxes. Some have been able to dedicate time to getting organized throughout the year, others have been too busy growing their revenue and managing their staff. Across the industries, here are three universal tax-related concerns that we hear about over and over.

“I feel like I have fallen behind on tax-related record-keeping”

If organizing bank statements and tracking expenses were your passion, you probably would have opted into a career as an accountant. Since most of us view record-keeping as a necessary evil, your best bet is to build a fail-proof process around keeping up with bank statements, tax payments and vendor invoices. By creating routines for all aspects of your business, you give yourself a chance to stay on top of these dreaded tasks.

  • Create and document what should happen every time you receive a bank statement, vendor invoice, time sheet or client payment. Then, schedule a block of time (daily, weekly or monthly) to handle these matters. Perhaps 30 minutes on a Friday afternoon will be dedicated to sorting the mail, scanning bank statements and following up on vendor bills. This approach will keep the rest of your week available to deal with the more urgent needs of your business.
  • Use technology as much as possible. There are Evernote and Dropbox for cloud storage of scanned documents. There is accounting software (like QuickBooks) and a host of stand-alone apps (like Mint.com) that connect to your bank and credit card activity for ease of tagging and organizing the expenses. These solutions can also eliminate your concerns about the accuracy of data entry.
  • If you are finding yourself in a state of panic over not having looked at anything accounting-related since the last tax season, block off a full day next week when you will do nothing but catch up. It may sound impossible, but your work will still be there – and you will have gained the clarity that comes from knowing where you stand, which should boost your focus for the rest of the week.

“I am not certain I get all the deductions I deserve”

Getting organized to track everything is the first step. After that’s done, work with a professional. A simple tax filing might be handled with a DIY solution like Turbo Tax just fine, but anything more complex than 1040-EZ should really be completed by a specialist. If you choose the right professional, you will get the bonus reward of getting access to his or her insights in matters of business funding, tax planning and budgeting. Bonus points if your CPA specializes in small businesses!

If you are still hesitant to spend the money on professional fees, keep in mind that having a human on your side in the event of an audit is worth every dollar you pay.

“I am not sure I can handle the tax bill”

Getting a large tax bill in February and not having the cash reserves to cover the expense is terrifying. To avoid the panic, build up a savings account to cover tax expenses. Get proactive about having your accountant calculate tax estimates early in the year to give you time to plan. Finally, brainstorm with your CPA or financial planner to optimize your tax liability.

Tax-Time Worries of Small Business Owners

At the end of the day, most small business owners would agree that their concerns around taxes stem from the fear is “not knowing”. Aside from getting a degree in Taxation, the best way to know is to become proactive about asking questions and staying up to date on the administrative side of your business. Work with your CPA during the year, and ask for help with getting your records organized, planning for deductions and capital expenditures in a way that optimizes your tax liability, and saving a portion of your revenue to cover the tax bills.

Become disciplined about these steps, and you will be rewarded with better sleep (and hopefully fewer surprises come tax time).