Now that summer is well on its way and tax season is over, I want to bring to your attention a few important points to your tax housekeeping activities. We all know that the life of a small company owner is a constant challenge, but there are several things you should always keep up to date, no matter what, when it comes to your company’s tax reporting.
First thing – if you haven’t yet filed your 2017 taxes, do so immediately! Don’t get in the habit of filing extensions and doing it late, because what invariably happens is all of a sudden when you’re in a pinch and you need some additional financing, you won’t have the Personal (Form 1040) and Corporate (Form 1120) returns ready, and you’ll have to scramble to get them done in order to apply for any potential financing needs your company may require. This is a hassle, stressful, and completely unnecessary if you had planned correctly in the first place by finishing last year’s tax filings when they were due.
Next on your list – keep your quarterly filings up to date. We just rolled through the week of the 4th of July and not only does it mark the middle of the summer, but also signals to business owners that the Employer’s Quarterly Federal Tax Returns related to 2nd Quarter of the year via IRS form 941 need to be prepared. Don’t waste any time — go get’em done.
Once again, If you didn’t do Step 1 and had your previous year’s Income Tax returns already submitted, it’s likely that your 941’s won’t be ready either, and the hole you are digging for yourself is starting to get deeper. So before you do anything else, take a deep breath, assess your situation, and get your tax returns in order.
Last but not least – do monthly financials. Have your accountant or bookkeeper put together a Profit & Loss (or “P&L”) statement and balance sheet for the most recent month ending. Why should you go through the hassle of doing this? Well, you don’t drive your car or truck without information on where you’re going do you? Why should your business be any different? You need a monthly P&L and Balance Sheet to highlight your sales results, expenses, deviations from your budget, and how much money at the end of the day do you have leftover? Without monthly, up to date financials, you are literally “driving your company wearing blinders”.
Another critical reason for having Monthly Financials is to stay up to date on your mandatory payroll deductions. Remember, the 3 mandatory ones are:
- Federal taxes
- Social security taxes
- Medicare tax withholdings
If you are lucky enough to live in a state that has no State-income tax, like I do in the case of Florida, then you will have saved yourself some money. Otherwise, to the above list will also have to add state-income taxes.
But either way, you can easily see how your monthly financials are linked to your payroll deductions – if you have one up to date, you have the other one, too. And vice-versa. If you haven’t done your monthly financials, there is a good chance you may be creating “tax arrears”, which is a fancy word for a “tax debt” to the federal government which is not a smart thing to do. So remember, do your financials and keep them up to date, and by doing so, make life for you and your company, a whole lot easier.
Enjoy the summer stay well…and keep your tax housekeeping in order.