We’d like to acknowledge the bookkeepers of Bay Area businesses. Like evening custodians, a bookkeeper cleans up the mess after everyone else has gone home. They must sort through the bills and reconcile any monies left scattered around a financial spreadsheet.
Maybe a company leader has tossed some old receipts on the bookkeepers’ desk while walking out the door for the night. The next day, there’s an unacknowledged “re-set.” All the financials are accounted for, an updated and organized balance sheet is available, and the cycle begins again.
Compared to other business professions, most bookkeepers are paid a humble wage for their responsibility level. And are generally ignored during the rush of a busy day at the office. Yet most don’t mind and just do their job quietly and consistently. If you have a loyal and efficient bookkeeper, count yourself lucky. That so-called “bean counter” is fighting for the success of your business! Their work might save you from a tax audit and expensive penalties.
But there will be consequences if you don’t have a skilled and reliable person managing the company’s daily financials. Especially around tax season! Some tend to underplay the role of the bookkeeper. The Bureau of Labor Statistics (https://www.bls.gov/ooh/office-and-administrative-support/bookkeeping-accounting-and-auditing-clerks.htm) reports that bookkeeping jobs may decline by 6% from 2022 to 2032. As a professional CPA team, we have to disagree. Just as humans must eat and drink water, businesses must remain fiscally solvent and pay taxes. That’s not going to change. And some people are better at crunching numbers than others.
Three Bookkeeping Mistakes to Avoid During Tax Season
Poor financial work can lead to plenty of headaches throughout the year. Yet, sloppy financials can lead to actual business losses during tax season. Here are a few standard bookkeeping and corporate tax mistakes that can hurt your business.
Misclassification of Expenses: Improperly categorizing expenses during tax season can lead to under or overreporting business income. The result is higher tax payments or penalties. Businesses can also lose opportunities to leverage write-offs and business tax advantages (https://www.safeharborcpa.com/business-tax/).
Poor Tax Planning: Unclean bookkeeping equals poor tax strategies. Visionary business leaders are looking to grow or sustain their businesses. They play the “long game” to ensure their finances help predict the business’s future. Planning for growth and success is more manageable when tax planning is precise.
Cash flow issues: If a bookkeeper is lazy about regularly reconciling expenses and income, it will impact tax season. Shabby financial management may mean misrepresenting a company’s financial solvency to the IRS. In turn, an ugly tax audit could be the result.
Avoid Late Nights before Tax Season by Securing the Best Bookkeeping and Tax Preparation Expert
Even with a full-time bookkeeper, tax season requires extra oversight from business leaders. It can also be when an owner realizes their bookkeeper could be better than they thought. Once they notice a few mistakes, an owner could work into the wee hours of the morning, carefully reviewing each line and cleaning up the work piece by piece. This is exhausting. And weariness can lead to problematic accounting errors.
To avoid this scenario, consider two of these options for handling bookkeeping and tax preparation: Contact a professional CPA to help manage bookkeeping and tax preparation duties throughout the year. Solid accounting practices by a professional will ensure an organized process for accurate business tax filings when it’s time.
When it’s time to begin the business tax process, bring in a professional CPA. Even with a terrific bookkeeper, a CPA has specific knowledge about current tax laws and regulations. The extra oversight and support could help leverage benefits and provide a more extensive tax return check. The position of working with an adept accountant cannot be taken lightly.
