Does this sound familiar? You’ve spent the year building your business. Bit by bit, you’re gaining freedom and independence. But when tax season hits, so does your anxiety.
Maybe you’re overwhelmed by the number of forms to fill out. Maybe you find yourself wishing you hadn’t earned so much so you didn’t have to pay as much in taxes. If so, we want you to know that your feelings are normal. We’ve seen them again and again in our clients.
But we also want you to know that anxiety doesn’t have to dominate your tax season.
An important part of our work at Bear Financial Solutions is helping people develop a healthy mindset about their finances. First and foremost, we want you to take pride in what a big tax season means. Namely, if you have to pay taxes, that means your business is profitable! Congratulations!
Second, we want to share a few bits of wisdom that can make tax season much easier. After all, tax season is a full quarter of the year — and you shouldn’t have to spend it being stressed out by your finances.
- Always File on Time to Avoid Fees and Interest
If you’re nervous about tax season, it can be easy to fall into the trap of postponing filing. But filing on time can help you avoid unnecessary fees and interest.
As we explained in our post about Easy Self-Employment Tax Mistakes, the best option is always to file on time and set up a payment plan. If you know you are missing documents or have found serious errors in your books, you can file an extension to give yourself a little more time to ensure your returns are accurate. If for some reason you have filed your return and realize there are material errors later, simply file an amendment.
- Set Up a Payment Plan if You Can’t Pay Right Now
We all face difficult years. If you simply can’t pay your taxes on time, the IRS has created solutions to help you through.
To start, pay as much as you can by your filing deadline. This shows the IRS that you are acting in good faith. If they see that you have reasonable cause for not being able to pay in full, they may remove or reduce your failure-to-pay penalty. Further, any interest you accrue will be based on the amount you owe. The less you owe, the less interest you’ll pay.
Next, set up a payment plan with the IRS. Remember, the IRS ultimately wants you to succeed in paying your taxes. They will work with you to make that possible. If you owe less than $100,000, you may qualify for a short-term payment plan (180 days or less). If you owe less than $50,000, you may qualify for a long-term payment plan, which allows you to pay monthly.
- Plan in Advance for Your Tax Liability
For many business owners, tax season anxiety is caused by the simple fact that they don’t know what to expect. The obligations feel like an unknowable mystery — but they don’t have to be. You can have an accurate estimate of what you’ll owe each year. And you can have money set aside to pay that amount.
After you file your return, sit down with your accountant. Talk through this year’s surprises and what you’re expecting for your business this year. Then, develop a strategy for how you’ll estimate and meet this year’s tax liabilities. Your accountant can also inform you of important changes from the IRS.
By planning ahead, you can budget more accurately. You can make adjustments for any financial surprises. And ultimately, you can enter each tax season with a clear and calm mind.
- Make Accurate Quarterly Estimated Payments
If you haven’t already been making quarterly estimated payments, and expect to owe at least $1,000, definitely prioritize this! Making accurate estimated payments alleviates the burden of owing a large amount in taxes at one time. You can visit the IRS website to learn more about how to calculate your estimated payments and how to make them or talk to your accountant!
- Maintain your Books Throughout the Year
Maintaining your books consistently throughout the year makes it so easy to access the information you need to complete your tax return! When done correctly this allows you to run the relevant statements from your bookkeeping software and prepare your return or simply deliver them to your tax accountant. Of course, taxes or no, we recommend this anyway because it also helps you keep a pulse on the health of your business finances!
Fill Your Financial Toolbox Now
Save yourself the stress of the last-minute scramble by filling your financial toolbox now. At Bear Financial Solutions, we can help you with bookkeeping, tax strategy, business coaching, bill pay management, and payroll processing. Look for our next blog post, where we’ll share some of our recommendations — or book a call to learn how we can help you directly.
Tax season can feel like anxiety season, but with the right tools, you can take back control. We’d love to work with you to make this your best tax season yet.