Top 5 ways to lower your tax season stress
The end of the holiday season marks the start of tax season. Are you ready?
If you’re like most, you spend January and February gathering information. You dig through desk drawers, search through your online bank account, and attack your worry-about-it-later pile. Sufficiently frazzled, you hurriedly dispatch a hodgepodge of facts and figures to your accountant.
Then, just as you sit down to relax, your accountant calls: You’re missing information.
Sigh.
But guess what? Tax season doesn’t have to be stressful. There are several things you can do, in advance, to minimize tax season stress—and potentially reduce your tax liability and tax preparation expenses.
Here are our top five ways to lower tax season stress:
(While it may be a little late to apply these to this year’s tax season, it’s not too late to incorporate them into your New Year’s resolutions!)
1. Make sure your accounting software is up to date
Keep your software updated throughout the year and be sure to enter all payables and invoices. It’s also a good idea to have accounts reconciled through the end of the year.
2. Get your documents in order
Before the end of the year arrives, take time to organize your documents and update your accounting records.
3. Perform an inventory count prior to year-end
The IRS requires that you value your inventory at the beginning/end of each year. For example, if your year-end falls on December 31, you must value your inventory at the end of the day on December 31, or at the beginning of the day on January 1. It’s important to perform this valuation annually (and consistently) to determine the cost of goods sold.
4. Compile a detailed listing of purchases and sales
Compile a detailed listing of any property or equipment that was purchased, sold or disposed of throughout the year.
5. If new loans were acquired or old were refinanced, gather up the loan agreements and amortization schedules (if you have them).
Accounting for loans and refinances can be tricky. To accurately record principal and interest payments, it’s important to set up the loan correctly from the get-go.
Submitting organized information to your accountant can prevent requests for additional information. Plus, having your ducks in a row may expedite the turnaround time for your tax returns. And it’s important to note: Disorganized materials could lead to missed expenses or deductions, as well as improperly stated income.
We also recommend setting up an appointment with your accountant in either November or December—before the end of the year. If your accounting records are up to date, your accountant may be able to give a general idea of your projected tax liability and refund, along with suggestions for reducing your liability—or increasing your refund—before the year’s end.
Remember, by adding these five activities to your routine, you could be well on your way to turning tax season into relax season. If you missed some of these steps already, don’t fret, add it to the to do list for next year.
Judd Nordquist, CPA, is AEM’s Construction/Real Estate Industry Leader. When he’s not hunting down ways to help clients improve their bottom lines, he’s hunting for pheasants with his trusty canine companion. Judd can be reached at 952.939.3204 or judd.nordquist@aemcpas.com.