How Your Bookkeeper Can Help You Prepare For Tax Season

Are you ready for tax season?

That’s right. We’re right around the corner from the wildest, craziest time of the fiscal year. Need help to remain sane as you prepare for what’s coming?

Look no further than the sanity-yielding magic of an experienced bookkeeper. 

To ensure your books are done and DONE WELL by the end of the year, you’ll need both a tax preparer AND a dependable bookkeeper or bookkeeping team who can prepare concise, timely records.

If you haven’t already, you might want to employ or outsource to an experienced bookkeeper or team who knows how to create synergy between themselves and your tax preparer. 

Don’t know what to look for in an outsourced bookkeeping team? Go here to learn how to find the right bookkeeping services for your business. 

The last thing you want is to overpay your taxes… or, worse, file them too late and have to pay crazy fees on top of that. 

So, what really is your bookkeeper’s role in preparation for the tax filing season? 

Let’s explore.

Distribute Those 1099 Forms 

Bookkeeping typically involves handling day-to-day financial responsibilities like recording transactions, managing inventory, invoices, and bills, reconciling your accounts, and taking care of payroll. 

Before going into the other areas, you first have to handle your greatest asset — your human resources.

You must get 1099 forms out to the people you worked with throughout the year for the January 31st deadline.

Instead of dealing with the hassle, your bookkeeper can cover the preparation and distribution of the correct 1099 forms to all of the vendors and subcontractors you collaborated with in the past year. 

Nip Uncleared Checks And Incorrect Coding In The Bud

Uncleared checks are easy to forget about. But they’re frequently the cause of one too many incorrectly issued 1099’s. Don’t let checks come back to bite you in the butt.

Take care of uncleared checks before it’s too late. In other words, before your tax preparer is ready for you.

If you’re hitting November and a check from March is uncashed, what are you going to do? Stop the payment? Reach out to the payee? Void and reissue in the new year?

Or, rather, have your bookkeeper nip uncleared checks in the bud so your tax preparer has the correct expense totals and won’t be searching high and low for the cause of discrepancies in your books — because, hopefully, there won’t be any.

If you use bookkeeping or accounting software, you know how wrongly coded transactions can turn the integrity of your books upside down. 

Again, it’s easy to make minor errors like this during the hustle of day-to-day runnings.

Ahead of the tax season, your bookkeeper can ensure all financial activities have been properly coded and fine-tuned in your system so everything is stable and your records are accurate.

Button Up Reconciliations, Payables, And Receivables

Way before tax season arrives, your bookkeeper should be tying up all loose ends by reconciling your accounts.

Do your bank transactions align with your business’ internal records? Does your general ledger match your bank account balance? Have you dealt with any unreconciled transactions?

Your bookkeeper may well end up doing this process simultaneously with reviewing open payables and receivables. Now’s the time to decide what receivables might be uncollectible and write these off. 

Decisions, decisions!

Most small businesses file on a cash basis rather than an accrual basis, so they’re not paying taxes on money that’s not been collected. CPAs and tax preparers ignore the uncollected cash because it’s not relevant when filing on a cash basis. 

This can lead to your open receivables snowballing into a huge list, and often it’s from past years that didn’t get written off, you get an overinflated view of what your business is owed.

If you’re on an accrual basis (which we recommend), you’ll also need to pay attention to outstanding bills that have not been paid and explore why they are still outstanding. Here’s what you’ll want to consider:

  • Are there any ongoing disputes or discrepancies that need to be resolved?
  • Were any of the expenses resolved a different way, for example through a vendor credit?
  • Did you use a different payment method (credit card vs check)? 

Anything in excess of 90 days outstanding should be wrapped up by the end of the year. 

Always Plan Ahead

If you fail to prepare, you are preparing to fail.” — Benjamin Franklin.

It’s quite possible to foresee the most common setbacks for tax season preparation. However, a trusted partnership with a professional bookkeeping team makes it that much easier for you to deal with mistakes and lock in a successful tax season.

Your bookkeeper does this by: 

  1. Staying up to date on tax law and tax policy — A high-value experienced bookkeeper or outsourced bookkeeping team stays current on tax law and policies. They won’t be surprised by months-old news when tax season rolls in.
  1. Adopting tough standards to ensure accuracy — Your bookkeeper should have strict standards in place so that when tax season approaches, your tax preparer deals with sparkling clean books, saving them time and saving you money.
  1. Creating an efficient system for recording transactions and storing documentation — Many of the documents your tax preparer needs to do their job can be shared with your bookkeeper. A smart system helps you avoid delays in tax prep due to incomplete information.
  1. Using automated and efficient cloud-based bookkeeping software — Bookkeepers who use cloud-based software will be able to work with your tax preparer regardless of either party’s location. Furthermore, you can quickly retrieve records instead of sorting through paperwork or navigating through Excel spreadsheets. 

Enjoy All The Benefits Of An Experienced Bookkeeper 

By preparing you for a painless tax season, your bookkeeper goes beyond safeguarding your strong standing with the IRS. They also help you achieve your desired results with profit planning and expense reduction. 

Additionally, keeping your books accurate throughout the financial year allows you to make sound purchasing decisions and determine if you should move forward in matters like new hires.

The bookkeeping team at Automated Accounting Services can help you by searching out and remedying errors and oversights as you prepare your books for tax season. In turn, you’ll be prepared to grow your business without experiencing the misery of tax season most businesses have to face. 

There’s no need to dread tax season if you know you’ve covered all your bases. 

Consult our team by booking a free call, and let us help you ensure and maintain the integrity of your books. By the time tax season is here, you’ll be able to sit back and focus on your business without any headache!