Prepare for Tax Season: 5 Essential Financial Tips from Juna Financial Solutions

By now, you’ve probably seen those quirky TurboTax TV ads from Intuit QuickBooks. In one, Tara the Tax Expert advises individuals and businesses in offbeat sectors.

“What if I’m in a state with no income tax, but my survival videos are viewed in 38 countries?” asks the survivalist, who is sitting with Tara at a campfire roasting marshmallows.

“I can help,” says Tara, “and if this is a business dinner, save those jerky receipts.”

Full disclosure: Juna’s clients are not in the great outdoors eating beef jerky and making survival videos, but they are seeking our guidance on financial matters that will set them up for success when working with their tax accountants.

With the IRS tax deadline set for April 18 (April 19 for Maine and Massachusetts due to the Patriots Day holiday in those states), companies small and large should be busy getting their documents prepared now to avoid the big rush come the tax deadline. In doing so, you will make it easier for your tax accountants to do the tax returns.

We polled our knowledgeable team at Juna, who are experts at keeping clean books for clients, on what they recommend as the top activities companies need to be thinking about now to get their houses in order before Tax Day. Before handing off your books to your tax preparer, here are the top five things businesses should be doing right now.

1. Review Your Balance Sheet and Profit & Loss Statement

As your accounting department, Juna is more than equipped to manage a variety of financial activities, including reviewing the balance sheet and P&L statement. While these represent two of the three financial statements companies issue regularly (the cash-flow statement is the other one), there are some important distinctions. As The Wall Street Journal notes, a balance sheet offers “a snapshot of your company’s financial health, providing a summary of your company’s assets, liabilities and net worth,” while a P&L “is a historical record (also known as an income statement) that shows how much you’ve made in revenues, how much you’ve spent and what your net income is over a specific period of time.”

With this in mind, it’s wise to review your own balance sheet and profit and loss statement first before sharing with your tax accountant. This approach enables you to make adjustments to ensure your books are clean. It’s important to review your financial statements on a regular basis, but especially before sending to your tax accountant.

Regarding balance sheets—which “tells you what you own and what you owe,” companies should review for unusual items such as negative balances in assets or liabilities. This usually means that something was recorded to the wrong account. This is also a great time to review your AP/AR aging report to see if there are any uncollectible balances that should be written off or if there are any errors or duplicates. And finally, for those who have a hard time keeping track of receipts, there are software applications we use for our clients to make it easy to snap a picture of a receipt or simply forward an email.

As for P&L statements, companies should review the P&L and look for negative amounts or numbers that seem too high or too low for what we call “reasonableness.” Additionally, companies would do well to see if there are any uncategorized or miscellaneous expenses. Your tax accountant will want details so put them in proper categories such as marketing or meals.

2. Investigate R&D Tax Credits

The federal research and development (R&D) tax credit, available to companies developing new business products, is “another great way to reduce your tax liability,” says this recent article in Forbes. Whether you track by category or class, make sure you track and provide the report to your tax accountant. The R&D tax credit is a big benefit, and many companies aren’t aware that they qualify. So, we recommend that you ask your tax accountant if you’re leaving money on the table. If you do, keep track of your R&D expenses either in a separate account or create a class for R&D.

3. Reconcile Your Accounts

Reconcile your accounts – It’s critical to make sure all bank and credit card accounts are reconciled. A common mistake is to overlook outstanding items on the bank account that haven’t cleared, so review those to make sure there are no duplicates or errors. In addition to bank and credit card accounts, reconcile loans, payroll liabilities, and other asset accounts to the appropriate source.

4. Establish a Process for Collecting W9s

The deadline for 1099s is January 31 each year, and while that deadline has passed for this tax season, you should set a process for gathering W9s from new vendors throughout the year. By the way, it’s not just contractors who need a 1099. Most individuals or unincorporated businesses must be sent a 1099 as well. It’s better to get the W9s from vendors before paying them because that’s the leverage you have. Just don’t wait until the last minute. Tip: See our blog post for more valuable information on 1099s. 

5. Monitor Your Expense Accounts

Keep non-tax-deductible accounts separate from deductible expense accounts. For example, keep meal expenses separate from entertainment expenses (meals are tax deductible, entertainment is not). Further, track business, travel and company-wide meals separately, and keep receipts for all meal expenses and document who you met and the purpose of the meeting.

There are no doubt even more tips to consider as you get your own financial house in order for tax season. But just as that survivalist received solid guidance on the TurboTax TV ad, these five tips should put you on a good path for surviving the tax season ahead.