Twenty-seven percent of Americans hate filing taxes so much that they’d get an “IRS” tattoo to avoid ever doing them again.
WalletHub’s survey determined that not only would nearly a third of Americans get a tattoo to create a future without taxes, but a tenth of them would also avoid talking for six months. By contrast, Pew Research Center found that about a third of Americans enjoyed doing their taxes. Surely these people are either nuts — OR maybe they are just likely to earn confused looks from the Americans who rated the IRS lowest on a ranking of government agencies.
While big businesses have the benefit of an accounting staff full of CPAs and tax professionals, most startups don’t. Entrepreneurs, like individual taxpayers, are often in the position of preparing their taxes themselves, often without the advantage of an accounting or auditing background. That means they sometimes drag their feet, throw a flurry of papers at a local tax preparer, or file for an extension.
If that description sounds similar to your 2018 tax prep experience, vow now to make next year’s filing easier. Here’s how you can do that.
Start Tracking Your Expenses Now
Disorganized clients are among accountants’ chief complaints. Clients whose records don’t match, whose receipts are a jumbled mess, or whose documents are trapped in a suitcase, only to be opened at a CPA’s own risk, make life more difficult on both themselves and their accountants. Their accountants often have to reconstruct events and gather supporting documentation, and the only people they can get that from are the owners of the very businesses they’re helping.
Worst of all, these disorganized businesses are high-risk liabilities. To avoid putting your startup and your accountant in a precarious position, find tracking software you’ll actually use. Most entrepreneurs find it easiest to use an app that allows them to input expenses as they occur and upload documentation so it sits in the cloud, not on their desks.
Some options simplify things further by using character recognition to complete the data entry. There’s really no excuse not to track as you go when technology does it for you — and it will reduce the chances of getting another spring-long headache next year.
Stay on Top of Things to Eliminate Surprises
If you’re part of the 77 percent who found the new tax laws confusing, you’re not alone. It’s been about three decades since such sweeping tax legislation has changed the playing field, but that’s also a good indicator that it pays to get to know the law.
Responsible tax preparation companies will walk clients through applicable changes, via software or in-person conversations, but entrepreneurs who want to tackle it themselves can access resources like TaxSlayer’s tools, which calculate refunds and run through tax law updates.
This is especially important for entrepreneurs who aren’t aware of all the deductions they’re eligible for. Beyond longstanding deductions for things such as utilities, mileage, and using home office space, the new tax law changes the repatriation tax to empower companies to bring money back to the US.
It also allows for a 20 percent income deduction for pass-through entities like LLCs. Keeping track of these updates helps startups better plan for expenses or shifting budgets so they’re using every cent they can — and not giving any away.
Set Up a Tax-Related Calendar
There’s nothing worse than diligently tracking your expenses and keeping on top of your expected deductions, only to completely miss a quarterly tax payment. Create a calendar that displays every tax-related deadline on the horizon, from quarterly tax payments to deadlines for issuing 1099s. Getting flagged reminders will keep that sinking feeling at bay, and the IRS even makes it easy by allowing startups to opt in for reminders.
While taxes may not be considered “fun” by two-thirds of Americans, they don’t have to be painful. Startups that track expenses as they go, stay on top of their expected deductions, and set deadline reminders will find themselves in a pretty comfortable spot when the next tax season rolls around. Releasing the fear of tax season allows startups to build their businesses — and not worry about becoming a tax liability.