Tax Debriefing
April 16th. Or April 17th or 18th or whatever date the government decides to pick this year for whatever reason. (I am partial to the 16th as it just may be my birthday) The nation breathes a collective sigh of relief. It’s over. Taxes are filed. Pop open a bottle of Dom and let’s celebrate!
Anything that can spread that much joy (even if it is because something terrible has concluded) should be celebrated. So eat, drink, and be merry the moment you sign off on your annual exercise of complying with the government’s tome of taxation laws. However, after descending from cloud nine, you should not just take your tax return and file it away, never again to see the light of day. This is the optimal time to be proactive and debrief on all the efforts that were required to get to this point.
Debriefing is an extremely underutilized activity. Once we have reached the finished line, what can be learned about how we got here? What processes can be improved upon? What could we have done differently for a more favorable result? All too often we check things off of our to-do lists without ever reflecting on them. The US Navy’s prestigious Blue Angels Flight Demonstration Squadron complete a formal debrief after every flight. The pilots are not the only participants in the discussion, all members of the team, including mechanics and ground crew, check their egos at the door and provide honest feedback on all aspects of the flight. And if that aids them in flying eighteen inches apart at 700 miles per hour, it can likely pay dividends for your business as well.
Here are some questions to ask yourself this time of year as part of your own tax filing debrief:
How organized is my document storage system?
You need to be able to prove to Uncle Sam that your tax return is accurate. How long did it take to gather and organize all the required documents needed by your enlisted tax partner? Are your records stored in a single physical location? Usage of cloud-based document storage is seeing enormous growth as it allows easier access to your records and reduces the risk of losing information due to catastrophic events. The technology is available to have files automatically saved to the cloud. You can even set up apps on your phone to take pictures of your receipts or invoices and have them saved directly within your accounting records!
Are my financial records optimized for tax preparation?
Great bookkeepers are proactive in maintaining your financial records in a manner that facilitates efficient tax preparation. This goes beyond categorizing day to day expenses accurately. It is building the relationship with the tax team; informing them of significant changes in the business that impact tax calculations like purchasing new assets, moving to a new office, or a change in ownership. Talk to your tax preparer about what challenges they had and any changes that could be made… simplifying the information for them could even be leveraged to negotiate a lower rate on preparation fees!
What changed from last year?
Quality tax preparers include a year over year comparison of your balance sheet and income statement; sometimes a three to five year trend as well. Be sure to review this information with your bookkeeper and discuss strategies that could lower your future tax burden. Are revenues expected to significantly increase next year? It could be a good time to acquire some needed assets and start an aggressive depreciation schedule. Taking steady and decisive action throughout the entire year is the best means of ensuring the IRS takes the smallest possible dip in your pocketbook.
Finally, if you did not file your taxes this year or prior years, the time to act is now! Pulling the covers over your head and avoiding it will not make it go away. The IRS can impose penalties of five percent of the unpaid taxes per month… up to 25% of your unpaid balance. Please contact me to review the specifics of your situation and together we will find the best solution. You be back to soaring thru the clouds in your F/A-18 Hornet in no time!
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