With the tax-filing deadline quickly approaching, small business owners should be taking steps now to make the process efficient and to maximize savings.
With the right professional advice and some pre-planning, income tax season doesn’t have to be a headache.
GROW Nebraska members Cory Morris of Morris Better Bookkeeping and Susan J. Tonniges, CPA, PC, offer the following tips to maximize your income tax savings and make the tax filing process as smooth as possible.
1. Maintain accurate financial records all year.
Morris, the owner of Morris Better Bookkeeping in Kearney, said maintaining up-to-date financial records throughout the year is one key to a smooth tax season.
Cory Morris
Staying on top of activities such as invoicing, reconciling accounts and loans with bank statements, and having an updated balance sheet are important.
Whether business owners prepare returns themselves or hire an accountant, accurate financial records will help.
Morris has a degree in agricultural economics and is a certified QuickBooks Pro Advisor. He is a self-described budget geek and helps business owners with monthly tasks such as invoicing, paying bills, filing sales taxes, processing payroll, budgeting and forecasting, business plans, cost accounting and preparing monthly financial statements.
Morris said business owners shouldn’t be embarrassed to ask for help with these tasks.
“Business owners have to learn everything,” he explained. “The fact that they don’t fully understand the bookkeeping doesn’t mean they don’t fully understand their business.”
His services are fully confidential and can all be completed virtually so there’s no disruption to the business. Business owners who work with him can spend more time building their businesses instead of stressing about that 10-cent difference when reconciling a bank statement.
While Morris doesn’t prepare income tax returns, he does create monthly financial statements for his clients so they know where they stand every month and can make changes sooner than later if needed. Plus, his clients are always ready with any information an accountant may need.
“Businesses working with me can take up-to-date financial statements to an accountant at any time,” he said.
2. Gather all financial records needed for the income tax-filing process.
Susan Tonniges, a Kearney-based accountant, has worked in accounting for more than 30 years, and her passion is income taxes, especially for small business owners.
Susan Tonniges
“You guys are the bread and butter of America,” she said about small business owners. “I love working with you guys. Each one of the tax laws affects you guys.”
Tonniges said business owners should round up the following documents/financial records to file taxes:
- An accurate listing of business income and expenses.
- Mileage log, including miles driven for business and total miles driven. (Tonniges recommends tracking mileage on a calendar, a notebook or apps such as QuickBooks online or Mile IQ.)
- Bank statements.
- Loan documents.
- Credit card records related to business expenses.
- Business expenses paid for out of pocket (keep receipts as proof).
- Copies of 1099 forms received.
- Copies of 1099s sent to others.
- W-2s and all quarterly payroll reports.
- Copies of receipts for asset purchases (furniture, computers, vehicles, etc.)
- Documents related to changes in ownership.
3. Understand the rules about COVID-19 PPE loans.
Tonniges said the CARES Act and follow-up legislation has resulted in many tax law changes this year.
“The biggest controversy in the tax world has been the taxability of PPP loan forgiveness,” she said. “I think most people can agree that the intent of the lawmakers was for it to be tax-free aid, but the IRS did not agree with that position and stated that it would count PPP loan forgiveness as taxable income. The passage of the CRRSAA law in late December 2020 made it clear that a forgiven PPP loan is completely tax-exempt and is not taxable income.”
She said this year also brought changes in employment taxes.
“There are credits and/or deferments available,” she said. “Some of these credits and deferments are exclusive, meaning if you chose to take one credit, the other credits are not available and some of them work together.”
She advises business owners to work with an expert to make sure they choose the options with the most benefit.
“I think 2020, with all of the employer payroll tax changes and income tax changes, has proven to most people that it is advantageous to work with an accountant,” she said. “Accountants work with a variety of businesses and probably have some experience in your particular industry in addition to a wide base of tax law knowledge.”
When Tonniges works with a new business client, she is often able to point out some missed deductions or the proper way to take deductions to avoid penalties and interest.
“A good accountant will try to get to know you and your goals so that they can point out tax laws that might affect decisions you might have to make during the year,” she said. “I always ask my client to call me before they make major decisions so we can discuss the tax implications before the decision is made. I hate to tell a taxpayer that they owe more in taxes. It is even worse to know that I could have helped them save money if they had just called me before they made the decision.”
4. Know what expenses can be deducted to reduce your tax liability.
Tonniges said most small business owners are a bit afraid of the IRS and don’t want to throw up any ‘red flags,’ so they will not take deductions that they are unsure of.
“Business use of home and business use of vehicles are confusing subjects, and I see a lot of errors in computing proper deductions,” she said. “My goal as an accountant is to make sure that my clients get every deduction possible. Most taxpayers understand that they have to pay their fair share, they just don’t want to pay more than their fair share!”
Tonniges said another issue she sees when working with new clients is not exactly income tax-related. State sales tax law and the requirements for filing Form 1099s are complex and frequently reported incorrectly.
Other possible deductions include retirement contributions, self-employed health insurance, home office, and business use of a vehicle.
“I can’t stress enough that you find an advisor that you feel comfortable with,” she said. “You share your goals and dreams, and they can help you find ways to get you there faster and more efficiently.”
5. Plan a pre-tax appointment.
This appointment allows business owners to make year-end adjustments that could reduce their tax liability and paves the way for a more organized for your tax appointment.
Most pre-tax appointments happen in November or December.
“There are things you can do to save money, but you have to take action before Dec. 31,” Tonniges said. “So many times people come in in January, February and March and I found out I could have helped them save so much money if they would have come in earlier.”
Morris said the pre-tax meeting will also help avoid sticker shock of paying a large unexpected tax bill.
“If you are unprepared, that tax bill can hurt,” he said.
6. Assemble a team of trusted experts to help your business succeed.
“The most important thing I would tell a small business owner is that it is never too soon to start asking questions,” she said. “It seems like an unnecessary expense to talk to a lawyer, an investment advisor, or an accountant, but it is so important to get things set up right from the beginning. You are starting this business because you feel you can be successful. Talking to and planning with advisors is the best way to set yourself up for success in the long run.”
She said to think of the cost as an investment in your future.
“As an accountant, I can work with your attorney to make sure that your business entity or entities are set up to limit your legal exposures and provide for the best tax savings,” she said. “Your investment advisor can also provide input on the best retirement plans that limit your tax liabilities and still help you meet your goals and dreams for retirement. Your best steps to ensure a successful small business should include good advice from experts you trust.”
For more information or to contact Cory Morris, visit https://members.grownebraska.org/list/member/morris-better-bookkeeping-10650
For more information or to contact Susan Tonniges, visit
https://members.grownebraska.org/list/member/susan-j-tonniges-cpa-p-c-10636.
Story by Kristine Jacobson, GROW Nebraska member and owner of KRJ Public Relations, a business that specializes in helping non-profits and other businesses tell their stories and gain momentum through blogs, newsletters, annual reports, social media and other publications.
