The average company doesn’t necessarily start thinking about taxes until after they close out the current year’s books. Between the year-end close and the December holidays, you may not have much free time on your hands to think about April 15, but it’s never too early to start tax preparation if you don’t want to start each new year behind the curve.
Payroll Tax Preparation
As you know, you must send out W-2s to your employees no later than February 1, so this is a task that must be completed early in the New Year if you hope to avoid potential penalties or late nights at the office. Depending on the accounting method you use, preparing W-2s for each employee may be as easy as pushing a button and waiting for your accounting software to do the rest. If this is the case – or you just place a phone call to your CPA firm – you’re one step ahead with your tax work.
On the other hand, you may have to gather salary and taxes paid information from a number of sources for manual compilation. When this is the case, gathering what you already have for each employee will mean less work after you complete the last payroll cycle for the year. Anything you can do to plan ahead now will mean more time to devote to revenue generation in January.
Supporting Tax Document Preparation
Do you remember that new printer you purchased for the company back in May? Do you know where you put the receipt or purchase invoice? When it comes to your taxes – business or personal – it’s often best to stick with the write-offs you can back up with documentation. If nothing else, it will certainly mean less time you must sit with your tax professional to discuss your business expenses for the year.
Right now is also a good time to set up your tax filing system for the next year. Doing so will allow you to avoid hunting for documentation next time you start tax preparation for the business because you’ll have a file to put everything in throughout the year.
Using Tax Preparation for Financial Planning
Sometimes, it’s to your advantage to accelerate the purchase of equipment or supplies. Knowing where you stand for the year – minus the last few weeks – will help you decide what business opportunities you can take advantage of during this tax year and which investments should wait until the first quarter. Taking a look at your tax situation before the end of the year is also wise if you think your tax liability may be higher than usual. Starting your tax preparation before the year end gives you a few weeks to look for additional last-minute ways for your company to save on its tax bill.