Bookkeeping is a necessary component of the accounting process, which in turn leads to taxation. By getting creative with your bookkeeping processes and implementing a simpler system, you can make tax season a more enjoyable experience. Tax season is usually quite hectic and organizing last-minute paperwork can be a challenge.
A good CPA or accountant takes the time to educate their clients on bookkeeping or at least prepare them to properly manage their accounts and other information. The main reason is to get a better system of classifying accounts in place in a timely manner before or during tax season. We have also found that many people tend to go to their tax advisor or accountant and tell them to get their processes in order. Most of them don’t understand bookkeeping, which makes the process very complicated.
What also contributes to this is the tendency to pick an accountant at random, without doing any research. We have developed a system that will help you highlight common accounting and bookkeeping mistakes and show you how to avoid them later.
1. Failing to properly reconcile bank accounts
Many businesses fail to reconcile their bank accounts properly, regularly, and in a timely manner. Banks make mistakes, and reconciliation can help catch them in time. Banks set deadlines for correcting errors. Some accountants perform reconciliations several times a month to catch these errors. If people do not keep books or follow an arbitrary system for reconciling books and accounts, it becomes difficult for accountants and auditors to get the information they need. There are ways to avoid these problems if you pay attention to the process and work properly.
2. Failure to conduct a thorough analysis of tax-deductible items
A careful analysis of tax-deductible items ensures that you get the best possible deductions on your business or personal tax return. If you are unsure of an item, ask your accountant if possible. Don’t put it off until the last minute. Planning is always the best option. Not all general ledger items are the same; some are more important than others. Some line items, for example, may allow you to take advantage of a tax cut or lower tax rate, and if you don’t identify them or have someone look for them systematically, you may be missing the point significantly.
3. Make sure the taxing authority finds and corrects any errors.
It is always best to correct errors before filing a tax return. Don’t leave it up to the IRS to discover and correct them. If you make and implement all necessary changes, the likelihood of an audit should be less. If there are problems with books or items, or if incoming amounts or purchases are suspicious, an additional audit is possible and the IRS can recheck the books. There is nothing wrong with an audit, it is just an extra task or burden to handle. If everything is done correctly and all amounts are accounted for, it can be assumed that everything is in accordance with the requirements and procedures.
4. Not checking books and accounts frequently
It is advisable to check your books monthly or quarterly to help you make decisions to improve the profitability of your business. It will also help you plan your taxes at the end of the year and avoid unforeseen events. Although tax returns are due once a year, they can still be filed at that time in most cases.
However, it’s helpful to work with someone who checks them regularly – comparing expense records from a year ago with bills and statements can be difficult. If they find a system that allows them to make the changes themselves or learn to check them monthly or quarterly, they won’t do it. Yes, it takes more time, but overall, it saves time and, in the long run, a lot of headaches. It also allows you to take care of those detailed requirements and records for tax season.
5. Do your own taxes and accounting
Doing your own taxes is generally not a good idea. Tax professionals attend seminars every year to keep up with the latest changes in tax law. Laws change regularly and accountants need to be aware of these changes, but the general public does not. With these significant changes, dealing with your own tax affairs could cost you more than it’s worth. If mistakes are made, fines and penalties may apply, which can lead to unnecessary trouble.
CPAs and sworn accountants are professionals who deal with accounting and tax issues on a daily basis. When it comes to accounting, some people prefer to save hundreds of thousands of dollars and handle the accounting themselves. For the best results, it’s best to seek advice, especially if you’re not sure what processes to follow or if you’re not very good at accounting. Rather than seeing working with an accountant as a cost, people should stop working with accountants because it will likely save them money in the long run.
Villie Walters Ramirez is a 32-year-old tax assistant at a tax firm who enjoys tax audit, bookkeeping, and Brooklyn accounting services. She has a post-graduate degree in accounting. Further, she has a severe phobia of cats. She enjoys traveling A lot.