Business tax returns are my jam. They’re what I do best.
Nothing warms my heart more than a perfectly balanced balance sheet and a profit & loss statement with a nice positive number at the very end.
Well, maybe that’s a slight exaggeration. I do enjoy a cup of tea and a good fiction novel curled into my favorite chair on a rainy day more than anything else. But I digress.
I do over 300 business tax returns every year. Thats 300 sets of books, numbers, averages. I start seeing patterns develop between businesses in the same industry. And yet, those business owners run their businesses very differently.
After almost two decades of working in the tax and accounting industry, I follow a set of guidelines for myself and also strongly recommend them to all my clients. It’s a simple list of three things:
- Government compliance
- Vendor compliance
- Party time – business owner requirements.
So what does this mean exactly? Keep reading.
1. Government compliance
The first thing any business owner should be doing is following the rules the government has set for operation of a business. Whether it’s method of tax payments or timing of estimated tax payments or timely payment of income taxes – not following those rules is a huge time suck and creates large penalties.
What happens when a client pays in their payroll taxes on time but with a check? Why is this a bad idea? Because the government REQUIRES that payroll taxes be paid electronically. There is a 10% penalty for non-compliance, which quickly adds up to $10,000+.
ALWAYS be clear about what the requirements are and then follow them. The penalties are not worth it. Trust me on that.
2. Vendor compliance
By this I mean there are vendors who provide you a service, which are required by government or required to keep you safe and secure. Some examples of these vendors are:
- Insurance agents – liability insurance and workmans comp insurance if you have employees
- Shred services – if you have confidential documents that must be disposed properly
- Printing – especially if there are requirements on disclaimers and how they must be displayed
- And many more.
There are too many examples to list out, but you get the idea. What are the requirements for your particular industry? It’s worth the time to find out, or worth paying someone to find out.
The worst case scenario is if you have a workmans comp claim and you didn’t apply for workmans comp insurance where it was required. You may be liable to pay the employee’s medical expenses for life.
3. Business owner party time!
Got the above taken care of?
GREAT! NOW – we focus on tax planning, making maximum use of all the deductions that are legally allowed per the Internal Revenue Code and see how to minimize your taxes based on that.
I never allow a client to do tax planning if they have outstanding tax obligations – whether it’s income tax and especially not if it’s sales tax or payroll tax. Those need to be paid in FIRST. No compromise [more on that in another post].
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Thank you for reading. If there’s any topic you’d like us to cover, respond in the comments or send us an email. Be sure to keep your questions general – we cannot give specific income tax advise without full knowledge of your situation.