Spring is around the corner…time for Pre-season baseball, Spring Break…and taxes too.
Now that tax season is finally here and in full swing, I want to bring to your attention a few important points. We all know that the life of a small company owner is a constant challenge, but there are several things you should always have up to date when it comes to your company’s tax and financial reporting.
First thing – if you haven’t started work on filing your 2018 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 or working capital, 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 potential financing your company may require. This is a hassle, stressful, and will likely delay your needed funding. And worse of all, it is unnecessary since, if you plan correctly and file your taxes in a timely manner, some of this stress can be avoided.
Next thing to keep in mind – keep your quarterly filings up to date. You should have already completed the last quarter of 2018’s filings, including IRS form 941, state quarterly filings for employers, and lastly, form 940 related to the annual Federal Unemployment Tax Return (FUTA) you as an employer must also file. Get ’em all done and stay current so that when your business needs additional financing, backlogged tax filings won’t get in the way and slow you down for getting the additional funds you may need.
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 blind”.
Another critical reason for having Monthly Financials is to stay up to date on your mandatory payroll deductions. Remember, the 3 basics and 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 the above list will have to consider 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 old-French word for being late on your taxes to the federal government, which is never a really smart thing to do. So, remember, do your financials, keep them up to date, and by doing so, make life for you and your company, a whole lot easier.
Enjoy the Spring and stay well.