December - Time to Start Final Tax Preparations

December - Time to Start Final Tax Preparations

Many small business owners across Canada have run into tax problems, simply because tax preparation is often something that they ended up rushing in the final few months before the filing deadline.

This is a perfectly understandable issue, as business owners - including farm owners and truck owner operators - typically have a lot on their plates in any given month, so finding the time to do some tax prep work well in advance of April 30 is often difficult, if not seemingly impossible.

It often isn't easy to justify trying to carve that kind of time out of a weekly or monthly schedule, especially when most owners aren't even thinking about their tax filings for most of the year.

Why Is That A Mistake?

However, most experts will point out to small business owners that it's not only wise to start tax prep as early in the year as possible, but it can also be crucial.

This is because it will help business owners to identify decisions and actions to take throughout the year to reduce tax obligations and maximize the potential for qualifying for tax credits and deductions.

You should constantly be on the lookout for just about any method you can find to keep your taxes as affordable as possible.

However, it's not always easy, and often requires large amounts of prep work, planning, and diligence to develop and stick to tax strategies throughout the year.

Having a tax plan in place is also a good idea because it can help create something of a road map to follow when things unexpectedly pop up over the course of the year, which, as many farm owners or truck owner operators can attest, they often do.

Small business owners shouldn't feel stressed out by their taxesSmall business owners shouldn't feel stressed out by their taxes

Where Should Tax Planning Begin?

The best idea for those looking to get their taxes squared away as early - and potentially as easily - as possible is to simply seek out a tax professional with a long history of work and experience your specific industry.

For example, if you're a farm owner and want to make sure you are getting a jump on a sound tax strategy given your unique circumstance, should you go to a company that has more experience with individuals or larger businesses?

Of course not.

Instead, you should seek out tax pros that are more accustomed to dealing with Canadians who have self-employed business income, specifically farm income, and therefore are far more likely to know the ins and outs of not only dealing with such filings, but maximizingyour chances for keeping your final costs as reduced as possible.

It's getting late in the year to simply start coming up with tax strategies that are going to keep liabilities down for 2015; however, there may still be some strategies you can use to ensure you start off 2016 with a plan in place you can take advantage of all next year.

Never too late?

Again, most people, including entrepreneurs, probably aren't even thinking about starting their tax prep work for another few months, and for those with self-employed business income, it might be longer than that; the filing deadline is June 15, while any taxes owing must be paid by April 30 to avoid interest.

But to be clear, starting as early as possible helps to avoid any hiccups that may arise, including important documents such as receipts for big-ticket purchases that may go missing and therefore take some time to find again or otherwise reobtain.

Moreover, though, that can also be a big benefit to many business owners because of how much time properly preparing an annual tax filing can take.

Even if such owners are fairly convinced that they can "cram" and get all their tax prep work done in a week or two - either on their own or with the help of a tax specialist - that's probably not that good of an idea.

Why That's A Bad Idea

This is true for two reasons: First, those who try to do their own tax filings usually end up making a mistake or two, even if they've had some experience filing on their own in the past.

But second, and perhaps more importantly, is that cramming means they're probably going to spend a lot of time sequestered by themselves in the final few weeks ahead of the filing deadline.

That's time they can't spend checking in on how their business is operating on a day-to-day basis, forcing them to be away from their families, or doing the work they may normally need to do to make sure everything is running smoothly.

If, for example, an entrepreneur normally spends about 40 hours on their tax prep, they can either choose to spread it out over a long period of time - such as a few hours here and there in the course of a few months - or by trying to get it all done quickly by spending 10 hours per week on it in the final month ahead of the deadline.

It is, of course, up to each individual how they want to approach such a matter, but experts generally warn that those who cram will typically end up regretting it in some way.

What Can Be Done Instead?

Those hoping to avoid plenty of extra hours at the office, or possibly making some simple mistakes that will likely end up adding to the amount of work they have to do later on, would therefore be wise to contact a tax professional within the next few weeks to make sure they're doing all in their power to avoid such common pitfalls.

This should include doing some detailed research to find out whether they have experience in the entrepreneur's chosen industry, but also research to avoid running into common mistakes that come with choosing a less reputable tax pro.

The fact of the matter is that there might be a pretty big difference between finding a specialist who can get a filing done and one who can get it done right, meaning that they'll not only have everything as accurate as possible, but also in such a way that it maximizes benefits and minimizes liabilities.

The difference between these two conditions can often be worth as much as a few thousand dollars individually each year, but experts will usually also caution that any apparent tax pro who promises to get their clients returns worth a certain amount of money probably isn't all that reputable.

What Comes Next?

Once the basic work of getting all the necessary preparation for the 2015 tax year squared away is done, though, many business owners simply end up going back to their normal everyday work without much thought paid to their taxes.

That is, until the filing deadline approaches once again next tax season.

However, most experts point out that it's usually a pretty good idea for business owners to actually stay in touch with their tax specialists throughout the year, having regular meetings to discuss things like tax strategies and what businesses can do to makes sure they're keeping their liabilities as reduced as possible.

Also, if that means taking a longer view of tax planning in general, it's also likely to be a huge benefit to small businesses going forward.

This is because it helps them to identify chances for their companies to make purchases or other moves that can benefit their companies in ways that are going to be beneficial for their companies in both the short- and long term.

With all these things in mind, the benefits of tax planning and coming up with a reasonable and workable tax strategy not only for one year, but many to come, should be apparent to many small business owners.

What's The Benefit?

The fact of the matter is that the farther out you are able to start your tax prep and work toward the goals which you collaborated on with your tax specialist, the better off things are going to be.

That doesn't just include when it comes to tax prep itself - although that's certainly a major part of it - but also the ways in which you are able to get your work done on a daily basis throughout the year, and especially at tax time.

The ability to get things done with tax planning work a few hours per week or month is likely to create a lot less stress and more often than not, that's also going to make for a successful and healthy business that's primed for growth going forward.

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