If you are a Tax Return Procrastinator (TRP) then you are not alone.
A Gallup Poll recorded that Tax Day (15 April in the US and 15 May in Australia) is one of the most stressful days of the year. No doubt this has followed weeks of long nights scouring through spreadsheets and checking reporting systems and bank accounts. So it is not surprising that many people delay preparing their tax returns until the last moment.
So how can you avoid both the procrastination and stress related to this year’s tax return?
By adding tax planning into your overall everyday business strategy.
This will avoid falling behind on paying your taxes and allow you to control them far more effectively, while possibly ending up with more deductions than you anticipated.
When you use strategic tax planning methods, you create a plan of minimising the tax you pay throughout the year to defer taxes where possible and optimise cashflow.
Procrastination costs us!
Leaving your tax preparation until the last minute can cause you to make some uneducated decisions. For example, by taking a large amount of income at the EOFY without knowing the full year’s business history and next year’s future outgoings, may land you in the next tax bracket and create cashflow issues for the new financial year.
Due for a refund?
Then why on earth do we procrastinate?
Surely having the money in our account at the beginning of the new tax year is better than waiting another 9 months or so before receiving it? When we understand our daily financials we can make better and more informed decisions to either make or save money for the business.
Tax law updates…
Having a tax plan also means you stay updated on the tax law changes.
Since the pandemic, deadlines and tax requirements for small businesses have been constantly changing. When you have a tax plan, you understand what has changed and allows you to reassess your strategy accordingly.
With a clear understanding of current tax laws, you won’t risk noncompliance with new or updated regulations and you’ll minimise the number of errors on your return. In turn, you won’t have to worry as much about an audit or owing more money later on.
The advantages of a solid tax planning strategy intertwined with your business strategy allow you to better understand the business roller coaster of cashflow ins and outs. This in turn will help you with making sound financial projections and good business and investment decisions.
Here are five key actions you can use to keep you focussed throughout the year to achieve a more balanced and regular approach to your tax objectives.
- Use a good accounting platform and automate your tasks.
There are many apps you can integrate with your accounting system to allow efficiencies and direct data entry.
- Schedule regular financial check ups with yourself and your bookkeeper/accounts team. This will avoid spending amnesia at the end of the financial year. For some this may be monthly, with others it may be best to track weekly.
- Don’t make it personal.
To avoid confusion separate your business and personal accounts and credit cards. This will reduce the headaches and time spent later with reconciliation.
- Diarise important deadlines.
Ask your finance team to hold you accountable to deadlines and have them schedule important dates in your diary with a reminder. Keep these appointments with yourself.
- Don’t do it yourself!
Outsource your bookkeeping. Your time is way too valuable to be doing accounts and looking over spreadsheets. Hire a professional to help maintain a schedule and hold the business accountable.