Starting Tax Prep Now Helps Avoid Common Pitfalls

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Across the country, most Canadians aren't even thinking about their tax liabilities at this time of year.

Obviously, the holiday season - with all its travel, shopping, and so on - is weighing pretty heavily on people's minds these days, and for good reason.

However, farmers, truck owner operators, and other Canadians who have self-employed business income should start to put together all the necessary documents for their tax prep work before the end of the calendar year.

Why Is This Important?

The basic idea behind getting all the necessary financial documents and related supporting material together well in advance of the April 30 filing deadline is to make sure you are prepared for any eventualities that may - and often do - arise.

Those who wait until the last minute to start their work on tax prep for the previous calendar year - pushing all the time they set aside until, say, mid-March or even the start of April - are far more likely to rush through it.

That, in turn, likely results in more mistakes, whether that's adding things up incorrectly or simply glossing over important information and therefore potentially missing out on beneficial deductions and tax credits for which you are eligible.

As a consequence, owners may end up paying far more on their returns than they were ever supposed to, and since the goal of any small business owner ought to be keeping their tax liabilities as minimized as possible, the extra work before the end of the calendar year might end up going quite a long way.

Farm owners and other entrepreneurs must do more to make sure their tax prep is done early.Farm owners and other entrepreneurs must do more to make sure their tax preparation is done early.

Why Is It Valuable?

In addition to helping to avoid stress and wasted time closer to the filing deadline, starting tax prep in December - or earlier, as many small business tax experts generally advise - also helps owners to sidestep potential pitfalls that come with any type of cram session.

For instance, an entrepreneur who starts tax prep work in December and devotes only 2 hours per week to the task of standard tax prep will do the same amount of work as someone who starts devoting 20 hours per week to it in April.

Spreading out the effort makes it easier for you to continue being hands-on with the day-to-day operations of your business throughout the process, rather than sequestering yourself behind closed doors - or just working a lot more than you normally have to - as the April 30 deadline approaches.

In addition to all that, this kind of prep work may lead to you being able to file a lot sooner than you traditionally do, ensuring you avoid any interest or penalties.

Remember, as a self-employed individual your filing deadline is June 15; however, any taxes owing must be paid by April 30. So it pays to have your tax prep done by the April deadline.

Another Big Perk

In addition to that, though, starting tax prep work now, with the help of a tax specialist with a background in your field - and particularly working with farm owners and truck owner operators - can also help to spot potential problems before they arise.

That is to say, there are many things that companies may find they can do to reduce their tax liabilities or increase their ability to qualify for certain credits, and it may be possible to get them done before the end of the year to lock them in.

As any business owner who has been around for a long time knows, if Dec. 31 comes and goes, that ends the tax year, along with your access to any credits, deductions, and so on for that tax year for which you might have been able to qualify.

Consequently, while it's obviously ideal to determine well in advance what needs to be done to ensure qualification standards are met, even starting in December you might be able to find a little wiggle room.

Those who wait until at least the start of 2016, however, will typically be out of luck - and will only be able to work with what they've got.

Getting It Right

Ideally, though, owners of these specific types of small, individually run businesses will work with a tax professional not only around filing season, but throughout the year.

The reason that's a good idea is actually pretty simple: It helps to craft not only tax strategies for this year, but also plans for the longer term that will help to identify the best possible steps you can take to ensure your business has minimized liabilities for what could be years to come.

Having a long-term tax plan can also help to spot any hiccups that could disrupt both it and the shorter-term ideas that entrepreneurs and tax pros have carefully crafted over a number of years, avoiding potential pitfalls that could theoretically lead to higher tax obligations in any given year.

Whether these plans involve things like purchasing new equipment at a specific time or the best ways to ensure the most advantageous scenarios, having the ongoing advice of a person or company who has worked as a tax preparer in your field for years is likely to prove quite valuable for any given tax year, as well as over multiple years.

What Should Be Done?

For those owners who have never worked with such a tax specialist before, there are some things that ought to be done prior to settling on one.

Again, determining whether a tax pro has experience within your specific field, whether that's farming, truck driving, or something else entirely, is likely to be quite valuable because it would allow that person to draw on years of experience with clients of similar backgrounds.

But owners should also look at other factors, such as how long they've been in that business, and even talk to them regarding what they think they can do to help that owner given their own unique circumstances, both currently and down the road.

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