How to Prep for Tax Time

February 17, 2020  

I HATE this time of year!

Before launching my own business in 2010, I spent fifteen years as a financial advisor. It was a great experience – but the time between December and April 15th was always so stressful!

In December, everyone was reviewing last-minute P&L Statements and either shifting income or expenses into this year or next.

Then January brought about creating 1099’s, W2’s, and ensuring all the year-end statements were complete.

February and March often meant gathering documents for the tax preparer and meeting with the tax preparer to ensure that all was complete and taxes were ready to file.

After launching my own brick and mortar businesses, I don’t think that there was a year that went by in those first 5 years that I didn’t file an extension on both my business and personal taxes. Why? Because I wasn’t prepared. I hadn’t been as diligent as I should in ensuring all our expenses were entered, categorized – and ready to report.

So here’s a quick list of things you can do to prep for tax time:

Find last year’s tax return:

Your current tax return often takes information from past years’ tax returns, so it is important to have last year’s returns to show past income, deductions, carryover losses, and other pertinent information for your current returns.

Decide if you’ll be filing an extension.

Most personal returns (your 1040) will be due on April 15th, but in 2017, the rules changed on partnership taxes. So, if you’re like me, you may have an LLC that has taxes due on March 15th. I missed that in 2018 and didn’t file my extension until April 5th in conjunction with my personal returns. This made my LLC return late, incurring interest and penalties. If you’re going to file an extension, they are typically automatically granted – IF you file your extension by the return due date. So ensure that you know WHEN your return is due. If you are planning on filing an extension, make sure it is filed prior to the due date of the return.

Gather all your documents:

  • W2 wage statements
  • Interest statements
  • 1099 Independent Contractor Statements
  • K-1 Investment statements
  • All documentation regarding income, expenses, investments, and more!

Choose who will prepare your taxes:

Will you do it on Intuit TurboTax or will you pay someone to do it? When Mike and I didn’t own businesses, we did our taxes on TurboTax and that was a great solution for us. As soon as we had businesses, LLC’s, business deductions and more, it was just TOO complicated to feel confident that we knew what we were doing. So we hired a CPA to help us file our taxes. Now that we’re at a certain phase in our businesses, we are going to need to be more proactive in our tax planning and may need to find a new professional who will take a more proactive role in working with us to ensure that we are catching everything!

The biggest thing about prepping for tax time is just to ensure that you meet all your deadlines. If you are concerned about the timelines, it is important to file an extension while you gather all your documents and work with your tax preparer to complete your returns.

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