Are you going to file a tax extension again this year? Are you pissed about it? If you are in the habit of filing a tax extension each year, you are not alone. According to the IRS, 20 to 25 percent of taxpayers put off their taxes until the final two weeks of the tax season. Additionally, 7% of taxpayers file for an extension each year. However, did you know that a tax extension is an extension on the filing date, but not the due date? That means you may still be subject to penalties and interest even if you file a tax extension.
So why would you ever file a tax extension? Below is a process you can follow so that you never have to file a tax extension again.
File An Extension And Make A Promise
If you really are in a tough spot where you are not going to be able to make the tax filing deadline, then file an extension. However, make a promise to yourself that this is the last time you will file an extension. Get into the mindset of filing your taxes on time and don't sway from that plan.
Commit to never filing a tax extension again.
Find Regular, Automatic Recurring Bookkeeping Help
The best way to avoid filing a tax extension is to find a reputable outsourced bookkeeping services company. You can search LinkedIn or Google to look for a bookkeeping service that has good reviews. I would also inquire with your current business network to see if they are using any bookkeeping services that would be a good fit for you.
Once you find a bookkeeping service that you like and that can meet your needs, sign up for recurring weekly or monthly bookkeeping with them.
Another important piece of engaging an outsourced bookkeeping service is to clearly communicate your expectations. If you expect the books to be closed out each month by a certain date, then let them know that. If you need the books updated every Monday morning, make sure they understand that.
Clearly communicate your expectations and deadlines to your bookkeeping service and hold them accountable.
Once you have engaged a bookkeeping service and the process seems to be working, don't check out! You should stay involved on either a weekly or monthly basis. This can be as simple as a monthly review with your bookkeeping team to get an update on how things are going or answer any questions they may have.
I would also recommend that you audit your bookkeeper on a regular basis. This doesn't mean you need to ask about every single transaction. However, questioning the details on a certain line item on your balance sheet or profit & loss shows that you are watching the numbers.
Don't ever go on cruise control with your bookkeeper. Internally audit your bookkeeper to show that you care and keep them honest.
Discover Value In Your Bookkeeping
The next thing you want to do is to get something valuable out of your bookkeeping. If you are paying a bookkeeping service to maintain your books, then you should get the most out of the process. If your bookkeeper only understands data entry and QuickBooks, but can't tell you what a profit & loss or balance sheet mean, I would fire them and find a different service.
Communicate to your bookkeeping service what information and reports are important to you and hold them accountable to delivering on your key metrics.
Use Your Bookkeeping To Grow
Finally, turn your bookkeeping system into a growth tool. Once you have a bookkeeping service providing you with regular updates on your key financial reports, you need to use that information to grow. Analyze the reports to look for both threats and opportunities and make those key pivots to stay on track.
One of the most underutilized reports is a good financial forecast. You should create a new forecast at the close of every single month. I like to forecast out at least 3 months in advance at the close of each month. You should then compare your actual results to your forecast and discuss any major fluctuations with your key management team.
A financial forecast allows you to look into the future of your business to understand whether there are any potential threats or opportunities. You should use your forecast to validate investments and expenses rather than working off of gut feelings.
Are you sick of filing for tax extensions rather than focusing on growing your business?
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