Stay Ahead to Combat Tax Pile-Ups
When it comes to taxes, businesses are commonly unprepared, Fiona Chen says. Recent tax changes, according to Chen, are made in place to encourage investments.
“The new tax laws are—relatively speaking—very comprehensive, and favor businesses in general [for] construction, production, and manufacturing to encourage investments,” she says.
Chen has spent 17 years in the tax industry, where she taught and conducted research at Eastern Washington University, Florida State University, and California State University for 10 years in both undergraduate and graduate levels in the following areas: public budgeting, financial management, computer applications, public policy analysis, and computer simulation modeling.
In addition to her time as a professor, Chen has worked as a field revenue agent in income tax, employment tax, financial products, and financial transactions with the IRS for six years. Today, she has her own public accounting practice and has worked with around 500 clients, she says.
“When I was an agent in the IRS, the number was in the thousands with individual examinations or team examinations,” Chen says.
Taxes cannot be done overnight, she says, and with automotive repair, there are so many assets that are included in the business.
“Unless a business has well around-the-year accounting, bookkeeping focuses, and support, usually by tax time, the numbers are not ready,” Chen says.
In order to stay ahead for tax time, as well as be updated with the latest changes, Chen shares tips on how to prepare your business properly.
As told to Kiley Wellendorf
Make sure you keep all of your receipts in all formats, whether it’s digital or on paper. Every receipt you have should be accounted for, as it’s important to continue tracking your finances throughout the year.
When it comes to taxes, your business should compile information all year long. Tax is a year-round issue, and when it’s updated year-round, it helps the owner stay in the look regarding finances. The book-keeping needs to be contemporary.
By keeping track of your receipts and expenses, it prepares you in two ways: you’re ready to record the information when taxes approach, and knowing what financial state your in can help in making future business decisions. You should be thinking every day about what happens with your income and expenses.
Do not rely on Quickbooks or TurboTax for the answers. In my opinion, while a majority of people may rely on QuickBooks, the program only can help out with one or two functions.
If your business does not have an accounting department, it’s critical that you reach out and get professional help from the tax industry. Taxes and accounting are very difficult to understand—just the tax forms itself, coupled with rules and regulations are not easy to understand by yourself. This is not something you can simply search online or rely on a software—it will be wrong.
I think professional help is very important, and there are tax preparers who specialize in each industry. When you utilize a tax preparer who understands the industry you’re in, then he or she might have more clients with a similar business and are likely more knowledgeable about laws.
Set aside time either weekly or monthly to provide an accountant or professional with your financial information. Before you meet, you should gather necessary materials for the visit: summary data for the tax preparer to use, the back copy of your accounting records, bank statements, driving mileage log, and material and supply expenses.
When you’re putting together the information, I would suggest using a software like Quicken to track your income and expenses. Your finances should be tracked daily, and the easiest way in my opinion to organize it is by using folders for different financial categories.
Lastly, do not try to outsmart the IRS and the tax laws. In my experience, I’ve seen instances where if a business has sufficient professional help with a large accounting department, including assistance from legal, finance, and accounting help—they might try to outsmart the IRS by not paying taxes instead of trying to determine how to pay taxes.
If you commit fraud for intentional tax evasion or aiding and abetting tax fraud, you could be subject to jail time. The IRS has various civil penalties and back tax with interest charges.