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Tax time is in full swing. No escaping it. This time of the year can be stressful for any business owner, including franchisees. If it’s the first year to complete tax returns for your franchise, it can be even more confusing. Of course, you can complete this annual project on your own, or you can use a tax preparer. Either way, there are some essential steps to consider.
- Organize your financial information. Collect bank statements and complete all financial statement worksheets. Find and record receipts for any expense that can be counted as a deduction. Find invoices for monies due. Have employee numbers readied. Bring together year-end liability statements for the past year and the year prior for comparison. Most of this can be simplified with digital software apps, but be consistent with input so you have complete information.
- Look for every deduction. No one wants to pay more tax than is necessary. For your franchise, you will want to reduce your taxable income with every deduction you can. After the obvious expenses of daily businesses, look for other commonly missed deductions like travel and auto expenses, software or subscription fees, insurance premiums, home offices. Tax codes change regularly, so a tax preparer might earn their own fee by better understanding all your options to reduce taxable income. And they will guide you in keeping your records clean on deductions like auto use by coaching you on how to record your expenses so that the IRS is satisfied.
- Consider an extension. Many businesses need more time to get their records organized. It is very common to request an extension until October. It sometimes allows you to find more tax-saving opportunities by redirecting funds. For example, even though the calendar year is over, many tax-saving options are allowed until April for the prior year. An estimated tax still needs to be paid by April 15th, but if postponing until October is better for your 2019 return, then delay your final submission.
- Plan for 2021. As much as we sometimes dread tax time, it is also an annual reminder of ways to be smarter with our hard-earned income. As 2020 moves through its first quarter, it’s a good time to think about ways to ease next year’s tax burden. Review tax law changes so you are working with the current and correct information for planning. Consider capital investments in the business that will expand revenue or reduce expenses. Plan what to do with extra cash at the end of the year, if you are so fortunate, like upgrade equipment or add more to a health savings account.
As you grow your franchise, you will be focusing on your own industry and specialty. Wisely consider how taxes affect your success, and enlist the help you need to efficiently make use of other people’s expertise. Then, you will have better opportunities to keep more of your money while paying lower taxes. Stay organized and aware of options that benefit you, and you will survive tax season.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.