Don’t want to look at that 2003 tax return for a good long time?
Understandable, but a bad idea, tax analysts say. Now is the time for small business owners to start thinking about their 2004 return, if they haven’t already.
"Once you complete the return, it's a time for reflection," said Paul Gada, a senior tax analyst with CCH Business Owners Toolkit, based in Riverwoods, Ill. "You have an opportunity to mend your ways and fix what was previously done wrong and to do things that were done right for next year," he told the Bergen County (NJ) Register.
First, think about what you went through to file your 2003 return, Gada said. Do you need to try another type of tax prep software, or are you satisfied? If you use a professional tax preparer, were your needs met? If not, pick a tax preparer for next year now.
Many business owners don’t think much about the current year while they’re preparing tax returns for the year before. By April 15, though, a quarter of the year is already over.
Mel Schwarz, director of the national tax office for Grant Thornton in Washington, D.C., said, "Ask yourself, 'Is what I've done in the past three and a half months consistent with my overall tax plan?' "
Estimating taxes for the current year should be part of the overall business plan, but one of the biggest mistakes business owners make is failing to put aside money for tax payments. Instead, said Los Angeles CPA Gregg Wind, "They're using the tax allocation to run their business." At this time next year, business owners will regret that strategy.
- Look for ways to maximize deductions. Get familiar with the tax code provisions that apply to your business. You may be overlooking something.
- Think about any losses that can carry forward into 2004 that could offset gains.
- Recheck returns from 2003 and 2002. If mistakes are found, you have three years from the date you filed to file an amendment and get back taxes you overpaid. If the mistake is in the government’s favor? Don’t keep it to yourself. "You really have a duty as a taxpayer to correct the error," Wind said.