Tax season doesn’t have to feel like you’re scaling a snowy mountain in your socks. When you use the right tools and strategies as a small business owner, you can turn tax time stress into a leisurely trek. It might make you cringe to hear the our repeated advice, but it stands firm like the mountain, “When you’re organized and prepared throughout the year, you’ll save time, dollars, and headaches at the end of the year.”
We can’t fight the truth, so together, let’s cover some tax-time stress busters.
Stress Buster #1: Stay Organized Year-Round
It’s not always easy to stay organized, especially all year long, but it can be easi-ER. One of the best ways to do this is to automate or offload things that eat your time and create the potential of unwanted and unnecessary work.
Are you taking advantage of:
- A cloud-based bookkeeping software like QBO (Quickbooks Online) so everything is at your fingertips and accessible with a phone app?
- A cloud-based receipt management app like Dext so you don’t have to worry about lost invoices and receipts because they can be retrieved with a couple of ‘taps’ on your phone?
- A professional payroll service and app to spare yourself the nightmare of a CRA P.I.E.R. review and possible short remittances?
- A professional bookkeeper to make sure your books are clean and complete for the accountant to perform year-end preparation and filing?
If you’ve already automated and offloaded, you’re close to being an entrepreneurial rock star. But… there’s more can you do to to bust tax-time stress.
- Schedule 15 minutes every week to ensure you’ve taken snapshots of your receipts and stored paper copies in a folder.
- Schedule 15 minutes every month to review last month’s “Big Three” financial statements. (See last week’s blog post.) Does anything seem off or missing?
- If the statements are raising an eyebrow, address the mystery the minute you make the discovery. If you can’t do it immediately, schedule a phone call, meeting, or task on your calendar to take care of it within the next three days. Don’t let weeks or months pass.
Stress Buster #2: Start Early and Avoid Procrastination
Last-minute scrambling is a big source of tax-time stress, for you, your bookkeeper AND accountant. Start preparing for tax season at least two months before the filing deadline. Review your financial records and identify any gaps or errors. If accountability is something you want put in place, schedule a phone call with your bookkeeper or accountant so it’s a fixed task. Team up to get this rolling.
Set reminders on your calendar for key tax deadlines. If you’re unsure about specific deductions, consult your accountant early. Waiting until the last minute often leads to overlooked credits or rushed calculations. You wouldn’t wait until the day before a hockey game to sharpen your skates—treat tax prep the same way.
Stress Buster #3: Understand Tax Deductions and Credits
Don’t miss out on deductions and credits you’re eligible for as a small business owner. Whether it’s a home office deduction, mileage reimbursement, or equipment depreciation, knowing what you can claim can save you money. The CRA website provides an extensive list of business expenses you can claim.
Keep a mileage log for business-related travel. Use apps to record kilometres driven, dates, and purposes of trips to ensure accurate reporting. Yes, it’s tedious, but it’s more pleasant than explaining vague numbers to the CRA. Do some mileage tracker app research and your due diligence. You may find the perfect tool.
Stress Buster #4: Stop Mixing Personal and Business Finances!!
Sorry, but that had to be emphasized. Blending personal and business expenses doesn’t only complicate tax preparation but also raises red flags with the CRA. If they do an audit, tax-time stress will seem like a “warm-up” for the real race.
Open a separate bank account and credit card for your business. Use these exclusively for business transactions.
Stress Buster #5: Don’t Miss Those Quarterly Tax Payments
Spending more money than you need to can create instant stress. If your business operates as a sole proprietorship or partnership, you may be required to make quarterly estimated tax payments and missed payments can result in costly penalties.
Mark quarterly tax due dates on your calendar and set aside funds each month to cover these payments. Use software to calculate estimated amounts or seek guidance from a tax professional. Think of it as paying your dues to keep your business running smoothly.
Stress Buster #6: Seek Professional Help
Tax-time stress is avoidable with proper planning and organization. By staying organized, starting early, understanding deductions, and avoiding common mistakes, you can approach tax season with confidence. Professional guidance and the right tools make it even easier to stay on top of your taxes and maintain peace of mind year-round. Reach out to us at Compass CPA if you’re ready to bust the stress.
