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Tax season can be an overwhelming time for shop owners.
We sat down with two experts to discuss tax tips for your official filing.
Tip 1: Leverage experts
Joe Marconi, former shop owner and current Business Development Coach with Elite Worldwide, recognizes that you shouldn't manage tax season alone.
“The first thing you must do is get a qualified CPA accountant,” says Marconi. “You must meet with them at least every quarter because there's going to be course corrections throughout the year that you have to make.”
Tip 2: Track expenses
One of the most common mistakes Alan Beech, President at Beech Consulting & Co-Founder of AdvisorNow, sees his clients make is improper expense tracking.
“They don't track their expenses properly,” says Beech. “If they're not putting everything into the system, then they're not tracking, and they don't know their costs and expenses. They need a professional accounting program where it's easy to enter their expenses.”
One of the easiest ways to do this is through shop management software.
Tip 3: Use management software
Keeping track of your gross profit and expenses throughout the year can help ease the load when it’s time to file. Effective shop management software can help in this area.
“It's crucial that you have some sort of shop software like AutoLeap because you want to understand your numbers,” says Marconi. “Get your numbers and goals correct. Make sure that you know what margins you need to reach in terms of gross profit on your parts and gross profit on your labor."
"AutoLeap does that for you," adds Marconi. "Once you set the parameters, set your goals, and make all the correct settings, you'll get a true account of your gross profit on your parts, your labor, and overall gross profit.”
Ignoring this part of the preparation process can cause things to go awry. Choosing a shop management software that works for your business is crucial when thinking about tax preparation.
“You can't manage what you don't measure,” says Beech. “If you're not measuring the key metrics of your business, you have no idea. You're flying blind and not even a coach can help you.”
Tip 4: Plan ahead
Preparing for tax season is a constant process. Waiting too long to get your numbers in order will put you in a bad spot.
One way to plan ahead in Canada is to be smart when setting your shop’s tax date.
“No right-minded person would ever put their corporation tax date in the personal tax season,” says Beech. “They would never do it because it just doesn't make sense. They would put it in on different dates.”
“That’s because the other side of it is you get six months from the year’s end until you have to remit if you have any penalties,” adds Beech. “Corporation times in Canada should never compete with personal taxes.”
US shops don't have this Canada-based option for tax planning. But keeping your books in check can prevent any last-minute emergencies.
“You need to have clean books. They have to be monitored, looked at, and reviewed continuously,” says Marconi. “You can't wait until January. By June of every year, you should have a pretty good idea of where you are.”
Final takeaway
Whether you have a shop in the United States or Canada, preparing yourself for a successful tax season is a multi-step effort. Use these four tips to help guide you through a seamless filing process.
