You make a tax payment to the IRS and by the time you turn around again, it’s time to prepare another payment. Without a tax strategy it seems like an endless cycle, and to top it off, there’s a chance you’re not even paying the correct amount (too much or too little).
To try to get it right, you head to the books but realize there’s plenty of work that needs to be done in those too.
All of this makes paying your taxes even more undesirable than it already is.
It’s time to take a step back and lean into efficient bookkeeping. This will improve your tax strategy and make paying your taxes just a little more bearable.
Here are a few ways you can incorporate efficient bookkeeping into your tax strategy:
Detailed Bookkeeping Maximizes Deductions
Claiming deductions is a smart way to save a little bit of extra money. However, some companies will spend at the end of their fiscal year just to maximize their deductions. While it seems like a good idea, this is only a good strategy if:
- You will absolutely need/use everything you purchase
- You can bulk buy to get a discount
If your end-of-the-fiscal-year buying falls outside of those two reasons, it could be incredibly wasteful.
To avoid even the possibility of wasting money, you should track all business and personal expenses throughout the year. As you do this, report back to your accounting partner so they can find all available deductions and tax credits. This decreases the chances of an influx of reporting at the end of the fiscal year and handles the search for deductions in smaller and more efficient ways.
Avoids Paying Too Much (or too little) to the IRS
It’s fair to assume you, and many other business owners don’t want to over or underpay the IRS. While it may seem time-consuming, the best way to avoid either scenario is to do your bookkeeping regularly. Keeping up with it will let you see how much you owe the IRS on a monthly basis, that way there are no surprises when a due date rolls around.
Regular bookkeeping will also keep you on track with quarterly payments. Because you will know what you are expected to pay in advance, you’ll be able to factor it in when calculating your cash flow.
Regular Bookkeeping Avoids Late Fees and Extensions
Another benefit to regular bookkeeping is you will no longer have to worry about late fees and requesting extensions.
Late fees can be a huge problem for many businesses. They are often a result of having no idea what you will owe when it’s time to make a payment. However, keeping your books up-to-date can help you avoid these late fees. Here’s how:
- You will be making accurate quarterly payments. As previously mentioned, your regular monthly bookkeeping will allow you to see exactly how much you owe each quarter so you can factor that into your budget and be aware of it when you calculate your cash flow.
- You’ll be receiving regular detailed reports from your accountant. Your accountant will keep you in the loop with how much is owed and when, that way you are always in the loop and you can be prepared for what’s coming.
- Your transactions will be reconciled often, which will lead to a much healthier month-end close process.Reconciling your transactions throughout the month is a forward-thinking step. When you do this, it makes closing the books each month much simpler, which leads to a smoother process when determining how much will be owed to the IRS.
- Filing your taxes will be much easier. Much like reconciling your transactions throughout the month makes month-end closing easier, regularly reviewing and preparing your taxes throughout the year will make filing much easier when the time comes.
While extensions are available, it doesn’t mean you should use them. Extensions often lead to late fees and penalties which is just an unnecessary loss of money. When you file on time every year, you can avoid extensions altogether.
Efficient Books Improves Your Tax Strategy
Your tax strategy should start with efficient books. When your bookkeeping is consistent and up-to-date paying your taxes becomes much easier. All you have to do is keep up with your books monthly or work with an experienced accounting professional who can do it for you.
When you do this, you’ll be:
- Maximizing deductions throughout the year instead of bulk buying at the end of the fiscal year in an attempt to save money.
- Avoiding under or overpaying the IRS because you’ll have a better idea of what you owe at the end of each month.
- Avoiding late fees and extensions by being prepared for upcoming payments and making them on time.
If you don’t have the time to improve your tax strategy through efficient bookkeeping, turn to Pasquesi Partners. We offer regular bookkeeping services and financial reporting to make filing taxes fast. Visit our website to learn more about our cloud-based bookkeeping solutions.