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It's the middle of November and tax season is around the corner....
And I know if you're like most business owners taxes are out of site out of mind - until it's January 2nd. The last of the holiday leftovers are gone, you're coming down from the sugar high, and all the sudden it's back to real life.
And real life includes paying taxes 😒
So when you're scrambling to get your books ready for tax season here's a couple of areas we see where clients - and accountants - make expensive mistakes 💲💲
1. Transactions are classified incorrectly. This happens a lot when transactions are recorded off of bank feeds alone. (We know they are convenient, but sometimes the time they save costs money)
2. Reports don't ty out to the returns. Your books don't match 1099Ks, payroll returns, or your tax returns. Which means you're a sitting 🦆 during audit season.
3. Prior period adjustments were made, but nobody really knows what or why they were made.
4. Your balance sheet is not fully reconciled and free from uncleared items. Do you know how many people I have seen come through my doors with double the revenue on their books than they should have because their bookkeeper skipped this step. I personally don't enjoy paying taxes on twice the income I should be - do you?
5. Unreconciled Items are sitting in the bank accounts, the credit cards, all over the books. Which means your books are not tax ready unless we have looked at each and every one of those transactions.
6. Depreciation Mistakes galore! This one hits a little hard right now as last month I looked at a client's return who owe an extra chunk of change to the IRS because their TEAM of CPAs miscalculated their depreciation and never caught the error…. It was a 5 figure mistake from a team of CPAs that had more than 10 years of experience each
7. Confusion over who is responsible for each part of the financial circle. Things don’t get filed, paid, completed, or followed up on. Disorganization in the business creates disorganization at tax time.
#7 is the main way we see compliance requirements get missed… someone isn’t taking care of them because everyone thinks someone else has it covered…. And generally that’s not the case. All compliance requirements for a business should be clearly laid out and assigned to someone who is responsible for completing them.
So how do you actually know if your books are audit ready? This list is a great place to start! Are any of these factors present in your business? And if things are off track - now is a great time to address it.
If you’re just too overwhelmed to get it done, or if you would rather spend this holiday season focused on friends and family, growing your business, or relaxing and you want some help…
We’re happy to talk with you about how we can take care of all of the above - so you can enjoy yourself this holiday season!