It’s that time of year again – and no, we aren’t talking about the Super Bowl or Valentine’s Day. It’s time to starting thinking about your taxes and audits! Your awesome, talented and completely humble (or maybe not) CPAs know their stuff when it comes to taxes and audits.
However, there are some things you can do in your business to help prepare for your audit and tax work and (hopefully) take some of the headache away regarding these fun projects.
- Have your management or ownership team review all financial information before you submit it to your CPA. You might catch a mistake that needs to be fixed.
- Understand your balance sheet! If you’re recording your financials on the accrual basis (here’s your reminder), your balances should fluctuate. Some common balance sheet blunders we see include:
- Prepaid asset issues. For example, did you prepay your insurance and still have some coverage in to the next year? You would then need to set that amount up as an asset, and reduce your expenses for the year.
- Accrued liability issues. These are really anything you owe at year-end. You would still have to pay these, even if you stopped doing business on the last day of the year. For these, think of accrued PTO to your employees, sales tax collected, etc.
- Take a look at the tax organizer list or list prepared by client that your accountant or auditor has sent you, and make sure all items are good to go. It doesn’t hurt to have this reviewed by someone else, too. In fact, once this information is ready to go, your CPA will likely accept it early.
- Designate an employee in your company who will be the main contact with your CPA. This is usually someone who is responsible for most of the financials, or someone who has strong project management skills. If you’re the business owner and feel like this doesn’t quite describe you, have no fear – it doesn’t need to be you. Your time might be needed somewhere else in the business. Your accountant or bookkeeper would be a great contact, as they work with your finances daily. As a side note, if you choose to outsource your accounting services, that person could serve as your CPA’s main contact. This will help you have more time to work on your business, not in it.
- When it comes to your audit, know when your auditors plan to either work at your site or work on your information. If they will be on-site, make sure you have a space (and maybe a treat or two – rumor has it CPAs like treats) with enough room for them. Make sure your main contact and others who may have answers are around. The assistance of these people can ultimately improve the turnaround time on your audit and tax return. Let’s be real, it feels good to get that over with.
Some other pointers to consider…
- Consider all the changes to your business that happened throughout the year: growth, new customers, etc. Are all the effects of those changes reflected in your financials?
- Did you have any ownership changes? Even if you’re not quite sure how to put this on paper, bringing them to your CPA’s attention is always a good choice.
- Did you add any long term assets (think building additions, vehicles, equipment, etc.)? If so, there are some details your CPA will want to know to make sure you’ve capitalized it correctly and are capturing the correct depreciation (hopefully some accelerated depreciation, too).
Ultimately, keep in mind that all of us CPAs are hired by you, to help you. Your success is our main goal. If we’re hard to understand, or using too much confusing number nerd talk, let us know. We want you to understand what’s happening in your business. Your CPA can be a valuable ally on your pursuit of growth and success for your business.