SVP Sales & Operations FINSYNC
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5 Best Practices for Small Business Owner Taxes in 2020

Spring may be just around the corner, but for accountants and tax professionals, this is crunch time. Here are five ways you can help smooth out the filing process for your small business clients (and, consequently, yourself) this tax season.

Feb 20th 2020
SVP Sales & Operations FINSYNC
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Your clients are counting on you to shepherd them through the often-onerous process of filing both their business and personal taxes. This can be particularly tough for small business clients, many of whom may just be starting out and have yet to put into place the best practices to limit their company's tax liability.

Hopefully, your clients are using cloud-based software and other technology to more efficiently and accurately track their receipts and finances, making it easier for you to square away their taxes this year.

Of course, businesses will also require guidance to help them avoid problems that go beyond accurate record-keeping. Here are five ways you can help smooth out the filing process for your small business clients this tax season:

1. Minimize Paperwork

The days of sitting at a desk across from a client with shoeboxes full of receipts are — or should be — in the past. Clients should be making copies of their account statements, payroll records, estimated tax payments and other key data available to you via cloud file-sharing programs.

Applications abound for digitizing loose receipts and automatically inputting the figures into your tax-filing software. Encourage your clients to turn over these documents on a quarterly basis at minimum so that you can begin to piece together their tax profile well ahead of the busy season. Better yet, have them give you access in real time to their expense reimbursement tool in the cloud. This will also help you flag any potential issues that could end up working against them come tax time.

2. Focus on Tax Liabilities

Nobody wants to have to fork over money to Uncle Sam, but it's often unavoidable. Many small businesses can't afford a big tax bill, so it's essential that their tax preparer give them as much warning as possible to prepare.

Even a rough sense of what they may owe come April can help clients align their invoicing and expenses in the coming weeks so that they’re in a better position to pay what they owe come filing time, even if they end up asking for an extension. There will be time later to figure out what went wrong with their 2019 taxes so that they can reduce their tax liability next year.

3. Go Beyond the Numbers

Your clients' use of applications that sync their finances will give you a leg up on spotting problems and inefficiencies that could have negative tax implications for their business. This opens up an opportunity for accountants and other financial professionals to take on a more advisory role with their clients, especially small businesses, which may not be able to afford to hire an accountant full time.

Should they restructure their business from an LLC to an S Corporation? Should they open a Health Savings Account? Are they doing enough to keep up with quarterly tax payments? These are all questions you can help them navigate in an advisory role.

4. Prepare for 2021 Now

Let's face it: Much of what will ultimately lead to a mostly painless tax filing must be done throughout the prior year. Did your clients not keep up with quarterly tax payments? Did they fail to keep track of receipts? Did they miss the end-of-year deadline to sell underperforming stocks and harvest losses? Were they able to set aside more money into a retirement account, reducing their taxable income?

The best way to minimize their tax pain next year is to ensure they are taking the right steps now and in the months to come. If they haven't already, encourage clients to embrace the new ways that businesses can streamline how they handle and track payments, invoices and other accounting tasks.

5. Improve Efficiency with Accounting Tools

Making accounting processes more efficient now will put your small business clients in a better position come tax time. Take invoicing, for example: Small businesses depend on their customers to pay on a timely basis so that they can cover their own expenses without running into cash flow problems. Overburdened business owners often struggle with this process, especially when they still rely on paper invoices that must be mailed.

By switching to automatic invoicing, your clients can bill their customers quickly, improving the chances that they'll be paid on time. It will also save them time by automatically sending payment reminders and, if necessary, past-due notices. Getting paid faster and more consistently will bolster your clients' cash flow, making it easier for them to make quarterly estimated tax payments so that they don't run into problems next April.

Another way your clients can improve their cash flow is by providing their customers with more payment options. With today's Fintech-powered online platforms, even the smallest businesses can easily accommodate payments via credit cards or bank draft (ACH).

Technology that automates back-office tasks like cutting payroll can also help businesses avoid filing headaches. Such applications can track employee hours worked, generating accurate paychecks. They can also automatically calculate federal and state tax withholding requirements, regardless of whether the employee is working full-time or is an independent contractor that requires a 1099 tax form.

Remember, regardless of how well prepared your small business clients are to handle their tax responsibilities, you're in an ideal position to help them keep more of their money and implement changes that will help their business grow, and the beginning of a new fiscal year is a great time to implement process improvements.

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