5 Benefits of Filing Business Your Taxes Early
No one really enjoys filing their annual tax returns. The mixture of gathering months’ worth of paperwork, figuring numbers, and potentially owing the government money is enough to give anyone a headache.
In unknown times, tax deadlines can be extended under certain circumstances. This allows individual taxpayers and business owners more time to prepare their taxes than usual, leading to some choosing to delay the process.
However, late deadline or not, it’s always ideal for business owners to make a plan to prepare and file their tax returns as early in the season as possible. Here are 5 benefits to filing your business taxes early instead of waiting until close to the deadline:
More Time to Plan for Paying the Bill
No matter how carefully you plan each year, there is a likelihood that you will owe the IRS some money when you’ve finished preparing your taxes.
If you wait until early April to prepare your taxes, you may be faced with a big bill that you have to come up with a plan to pay in just a few days’ time.
By working on your taxes earlier in the season, such as early February, you’ll still owe the same amount of money, but you’ll have more time to figure out how to get that bill paid by the deadline. This may mean drawing on a line of credit, shifting some assets, or working with the IRS to create a payment plan that fits into your business’s financial abilities.
Leaving your tax return to the last minute means you’ve got to come up with a plan much more quickly, and can lead you to some unappealing financial decisions such as taking out short-term loans with high interest rates.
Less Competition for Your Tax Preparer’s Time
Even a simple tax return takes a fair amount of the tax preparer’s time, and recent changes to the tax code have caused more people to work with tax preparers than in the past.
This all means that a tax preparer’s time is in high demand, and their schedules only get more tight the closer you get to the filing deadline.
Making an appointment with your chosen tax preparer earlier in the season gives you more of their focused time, both in meeting to discuss your return and in preparing your documents. There are far more open spaces on their schedule in early February than there are in late March.
Additionally, because a tax preparer’s time becomes in shorter supply later in the season, you may have to pay more to ensure that your return gets done on time than you would if you had started earlier in the year.
Less Chance to Need an Extension
If you have a complicated tax return, or if you have trouble locating documentation, the amount of time it takes to get your return ready to send can be lengthened.
When you’re running up against the official filing deadline, anything that makes your return take longer to complete can increase your chances of needing an extension.
If, for example, you need an official document to prove that you qualify for a specific deduction and you have to send out for that document, your tax return is at the mercy of you getting that document. Should that documentation not get to you in enough time for your return to be filed before the deadline, you need to file for an extension.
Had you started compiling your tax return earlier in the season, you may have a better chance of getting those documents you needed or figuring out your complicated return with enough time to send it by the deadline.
Avoid Amendments & Mistakes
When you’re in a hurry, the chances of you making a mistake increase. This goes for rushing to do anything, such as driving, cooking dinner, or filing your taxes.
Giving yourself ample time to gather proper documentation, double-check that you qualify for all listed deductions, and thoroughly proof the final return means you’re more likely to catch any mistakes before you send your return in.
If you don’t catch these mistakes prior to sending in your return, you then need to file an amendment to correct your mistakes. This takes up even more of your time and complicates your return even further.
And, if your mistakes are found before you notice them, it could lead to you being audited, which is an even more time-consuming and stressful process.
Doing anything on a tight deadline can initiate a stress response. If it’s something as important as your business’s annual tax returns, the stress can be overwhelming.
By giving yourself plenty of time to collect the necessary receipts and documents, talk with your tax preparer, carefully go over your return, and create a plan to pay any money you might owe, you’re decreasing the amount of stress and worry that surrounds the task. You have enough stress and worry in your life, and any time you can find a way to decrease your stress levels it’s a good thing.
If you don’t start on your taxes soon enough, you run the risk of being one of those people who whooshes into your tax preparer’s office, box of crumpled receipts in hand, just days before your taxes are due.
Cloud-Based Accounting Software for Small Businesses
Getting started on your annual tax returns early is a great way to avoid mistakes and decrease stress, but what if you could keep up on the bookkeeping all year long to make tax season a breeze? With Toki, a cloud-based workflow management and accounting software solution for small businesses, you can!
Toki allows you to link your business bank accounts, reconcile receipts and invoices, collect payments, and more from anywhere you have the internet. Keep your books current all year long for a hassle-free tax filing season. Try Toki today!