Business owners can save time, money when it comes to tax time

Be prepared.

It's one of the best things small businesses can do when it comes to providing information to their tax preparer.

It could not only save small-business owners a lot of headaches, it can actually save them money.

It's about 85 days before April 15, when tax returns are due, and small-business owners are starting to scramble to gather everything needed to file their taxes.

Rudell Richardson, the owner of Richardson Financial Inc. in Macon, said it's not too late to get organized, but he recommends that business owners develop a system to collect and record throughout the year for what they need to give their accountant.

"Once they get behind and they have to compile a whole year, they are more reluctant to do it," the CPA said.

He works with small-business clients who have from one employee up to 100. Typically they have up to 10 workers.

In a survey of more than 675 owners last year by the National Small Business Association, almost 60 percent said the administrative burdens were the biggest problem caused by federal taxes. And 85 percent of those surveyed said they relied on a professional to prepare their returns.

There are other things owners can do -- and should do -- not only to help their tax preparer, but keep them out of legal trouble with the Internal Revenue Service.

"Small businesses that carry inventory -- they may have purchased items for resale or they manufacture items for sale -- what I see sometimes is that they forget to take an ending inventory," Richardson said. "That's important because that ultimately impacts their profit or loss. It impacts the amount of taxes they might have to pay. They should do that at the end of December. It's very important."

Haphazard or incomplete records are one of the biggest problems accountants see at small businesses, according to the survey.

It's important for owners to keep accurate records and documentation to back up what they spent or bought throughout the year.

"They are not supposed to, but sometimes they'll say 'this is what I spent on something' and I'll say 'prove it,' because that's what the IRS will say," Richardson said. "If you can't defend an invoice, then we are not going to allow the deduction."

A tax preparer could ultimately be held responsible through what's called a preparer's penalty, he said. "And those penalties could be pretty stiff."

Richardson, and an Associated Press report, say that using accounting software to organize records will help make the process flow more smoothly and help guard against errors that might be costly. A business's financial records could be linked with tax preparation software, which shortens the time it takes to compile a return.

"We encourage all of our business clients to use software to keep their records," Richardson said. "But whatever you put in, you get out," so the record keeper should be careful. "We review what they have entered ... and will review it and make whatever adjustments necessary."

It might be too late to get those records into an accounting program for 2015, but owners could start now for 2016.

If business owners didn't make estimated tax payments during 2015 as they are supposed to, they should meet with their accountant as soon as possible, Richardson said.

"If you haven't paid estimated taxes and your business is profitable and (the return has to be extended), it means that if you have a tax lability you probably won't pay it by April 15 ... and that means the penalties and interest start on April 15. So you end up paying more money."

One of the big pitfalls is not classifying workers correctly. Small businesses that hire contract workers or freelancers need to be certain that these workers are truly independent.

Also, it's important to fill out a W-9 form for every contract worker, similar to a W-2 for employees, Richardson said. Owners don't have to file a 1099 to the IRS for any contract worker who gets paid less than $600 during the year. But they should get a W-2 with the worker's address and Social Security number just in case it's needed if they hire that contract worker again during the year and exceed the pay threshold.

So, the bottom line for business owners: keep good records during the year, be organized and get with your tax preparer as soon as you can.

"What we've done the past few years, we have a deadline," Richardson said. "If you haven't brought your information by March 20, we can't guarantee we can have your return prepared by April 15.

"The more organized they are, the less they may have to pay the accountant."

Information from the Associated Press was used in the story. To contact writer Linda S. Morris, call 744-4223.

This story was originally published January 18, 2016 at 8:24 PM with the headline "Business owners can save time, money when it comes to tax time ."