With the holiday season wrapping up, it’s time to prepare for what many consider the most-dreaded times of the year: tax season. With clients coming out of their end-of-year hibernation and the flu making its rounds, how can a solo practitioner or small firm realistically get everything accomplished and get taxes done on time? Here are a few tips to make tax preparation and filing go a little smoother.
- Make it a year-long process. As stressful as it may sound to be thinking about tax time all year, one of the best ways to set your firm up for success is to keep documents organized year-round. Doing so can prevent the hectic scramble of searching for receipts and corporate documents in the months leading up to April 15. Consider creating online or paper-copy storage systems and policies; designate a specific person or persons to be in charge of maintaining those files. As receipts or documents come in, they should be automatically stored and organized. Don’t let the old “shoebox of receipts” trope befall you!
- Know your deductions. Compared to big-law attorneys, solo and small firm attorneys may be eligible for many more tax deductions. Whereas practitioners in bigger firms are generally provided reimbursement for items like electronics and business travel, small firm lawyers often pay out of pocket. Be sure to keep all receipts relating to your home office, phone, computer, car, and other work-related expenses as you or your business may be eligible for deductions for such expenditures.
- Bring in the professionals. You’ve just paid all your business’s year-end and new-year expenses. On a personal level, you may be staring down some holiday debt. So, it may be tempting to save some money by doing your firm’s taxes yourself. Avoid the temptation—it is only likely to result in problems for you down the road. There are a slew of hidden dangers and opportunities in the tax code that you may miss if you don’t use a professional tax preparation service, including things as basic (but crucial!) as filing the wrong forms for your business type. If your firm has employees, it is vital that there be no errors in processing those employees’ tax documents. Most tax services also include a guarantee of their work, so you are getting that added protection and security for the cost.
- Invest in digital assistance. There are several services available to manage production of tax documents electronically. Systems like ADP Smart Compliance and Equifax Tax Form Management, for example, can automatically repopulate W-2 reprints, provide guidance on avoiding common errors, and offer many other benefits.
- Learn from the past and plan for the future. Your business’s tax return from last year can serve as a starting point and a guidepost—it’s a compare, contrast, reference, and roadmap resource all in one. Prior tax returns can tell you in a glimpse how your business is doing year-over-year and perhaps help you pinpoint problem areas (are those increased travel or software expenses paying off?).
Similarly, tax time may be a good opportunity to review your business plan. Does it still make sense to be a sole proprietorship or is a different corporate structure more suitable? Are those independent contractors really independent? Talk with your tax advisor about the implications of these various potential changes.
With tax season looming, it’s important to get a head start on your business’s preparations. These simple tips can give your business a boost!