Makin' a List, Checkin' It Twice

The winter holiday season is fast upon us, for better or for worse. But before we make our gift (or Grinch) lists, we business owners have another important matter to attend to: collecting documentation for our visit with our CPA.

You have made an appointment, haven’t you? And you’ve scheduled it for well before the end of the year? Because it’s important to discuss your situation now, so you’ll know if you should do anything to reduce your tax burden (such as buying equipment or funding a retirement account) before December 31.

Let's say your appointment is set for just after Thanksgiving. What will you need to take with you? That depends on your individual circumstances. The following list isn’t comprehensive, but it’s a good start:

o   Your most current business Profit & Loss  and Balance Sheets.

o   Estimates of your expected income/expenses to complete the year.

o   Anticipated Schedule K-1s from other companies you may have an ownership in, and W-2s from other companies you may be receiving income from.

o   Anticipated cash balance at the end of the year. As mentioned above, you may need to go ahead and purchase now those large items you have planned for the future, in order to reduce your 2012 tax liability.

Note to business owners with inventory: Don’t take your computer’s word for it that you have X number of items A, B, and C. Take a physical year-end inventory to monitor “shrinkage” caused by theft (whether external or internal), breakage, or whatever. We'll will need accurate information to prepare your Business Personal Property Tax return.

Finally, don't forget to make a list of questions and issues to discuss with your CPA, like: 

o   Any “life change” you have experienced in 2012 – marriage, divorce, new baby, adoption, new dependent, etc. 

o   If you’ve sold your home, bought a home, made investment gains or suffered losses, made new investments in a partnership or company… just to mention a few.

o   Questions about how upcoming changes in tax law will affect you, such as those associated with Obama-Care.

o   If you’re approaching retirement, you might discuss whether to take Social Security as soon as you’re eligible or if it would be more beneficial to wait.

Once you’ve made your appointment, created your list, and located the pertinent documents, you’ll be able to relax, kick back, and 

Have a Happy Thanksgiving!

On Not Being a Turkey This Season

November. The word evokes a variety of images: Turning back the clocks. Bare tree limbs chattering in chill winds. The warm glow of a stuffed turkey on the table with the family gathered round. Gorging on feasts of college football. Organizing your financial records.

Say what? You mean that last isn’t part of your typical November? Maybe it should be; tax season’s just around the corner, you know.

Whether that groan was in response to what I just said or from overeating, buck up and get moving. Much like the mess in the kitchen, bookkeeping responsibilities don’t go away if you ignore them. Let them sit too long and strange, fuzzy things can creep out of them.

But this strikes no fear into your heart because you’re already on top of things, right? A place for everything and everything in its place, color-coded, arranged newest-to-oldest, clearly labeled, and bound.  Kudos! We love our OCD friends.

For the more relaxed of us, though, there’s still time. We don’t really gain an hour with the passing of Daylight Savings; those sixty minutes merely shift to another part of the clock. Let’s put them to use for something other than sleeping. You’ll be glad you did when you pull up your tax forms and have to decide what numbers to put in the boxes.

Better yet: if you set up a simple system this year for keeping organized in the future, you might be able to actually sleep that extra hour next November.

When gathering your yearly records, do you scrounge around the kitchen, laundry room, and den searching for errant papers? Once you find them, see where they’ve tended to congregate. That’s where you should put a meeting place for them—a box, a large envelope, or whatever works best. Keep it accessible and use it daily, and organization will be easier in subsequent years.

But when choosing the right depository for your records, bypass the bushel basket; there’s no need to keep every scrap of paper that crosses your palm. How can you know what’s important? For a starting place, get out last year’s tax return and see what you needed to prepare it. Then add documentation for any new real estate transactions, inheritances, investments, losses, etc.

To make things even simpler, separate your business records from personal, if applicable. For a home-based business, some of these might be the same, such as if you claim a portion of your real estate and utilities as business expenses. In our next post, we’ll discuss tax planning with your CPA before the end of the year so there are no surprises! Call and make an appointment now for December.

Oh, yeah, one more thing: while you’re at it, don’t forget to organize your electronic files too. Sure, the computer has a handy search feature, but that’s only for emergencies. It’s more efficient to be able to put your cursor on what you want the first time.

Wise decisions concerning time investments are as important as financial ones. With the days growing shorter before tax season descends, let’s take both seriously. You’ll be thankful you did.