Minimize Tax Terrors in Two Simple StepsBy Nina Kaufman, Esq.
It’s coming up to that time of year again. The time that most business owners dread. Tax season.
Most entrepreneurs would rather have root canal surgery without anesthesia than go through the nightmare that is tax return preparation. Where are my documents? What can I deduct? Given everything going on with the economy, am I going to get “hosed” by the IRS? Saddled with a tax bill I can’t pay?
I’ve managed to keep tax trepidations at bay with two simple steps:
- Stay up-to-date with my computerized bookkeeping throughout the year.
- Pay someone else to do it.
Notice, I said these steps were simple–not necessarily easy. Keeping current with bookkeeping means one of two things: Either you’re spending a fair amount of time doing it, or you’re paying someone else to do it. But once you develop a system (such as taking the first and third Friday morning of each month to make sure all bills are paid, invoices are sent out and outstanding statements get collection calls), you can pretty much move on autopilot.
As to doing your own tax returns, my opinion is: Don’t. According to Chicago attorneys Horowitz & Weinstein, 2008 alone saw no less than six bills changing tax legislation. That doesn’t include state and local income taxes, property taxes, sales taxes, employment taxes, utility taxes . . . and the list goes on. Good luck to you trying to keep up with all of it.
And the issue is not just your business taxes; it’s your personal taxes, too. For those operating LLCs (pass-through entities), your whole tax outlook can be affected by plugging in the wrong numbers on the wrong line, or not knowing about a deduction that’s available to you. I prefer to hand this off to my accountants–people whose job it is to keep up with all of the minutiae that make even my head spin.
Think of it this way: Would you let your least qualified employee handle your most sophisticated business assignments?