At Tom Vignali CPA, Inc., our staff was relieved to complete another successful tax season filing personal and business returns, with only a few extensions needed. Tax season is always hectic as data is collected from clients to meet the March 15th corporate and April 15th personal return deadlines. This process is further complicated by the March and April deadlines for the reconciliation of the previous year’s financial and accounting records.
We would like to share some observations which pertain to timely and accurate tax filing for personal and business tax returns.
Personal Returns: Get Organized (And We Can Help!)
We provide our personal tax clients with a tax organizer outlining what documents and records are needed for their tax returns. Some of the issues addressed by the tax organizer include earnings, W-2s, home ownership, investments, dependents, child support, day care expenses, medical and healthcare expenses, etc.
Clients need to advise us if their filing status has changed, i.e., married or single. They also need to make sure the proper amount is being withheld from their paycheck by their employer based upon their filing status. There is a tool on the IRS website that will assist with determining the proper amount. Less-than-adequate withholdings could result in penalties and interest.
It is important that tax-related documents are collected and maintained throughout the year so they are available at year-end. Waiting to do this until the end of the year often leads to the discovery that documents are missing or have been destroyed. It is critical that individuals know in advance which documents they need to compile as they receive them to make the filing easier. It becomes time-consuming and expensive when copies of these documents need to be requested from various agencies and entities to complete the tax return.
For this reason, we provide all current and new clients with outlines pertaining to ALL of the documents and adjustments that must be addressed.
Corporate Returns: Avoid Year-End Crunches
Revenues, expenses, bank statements, payroll records, 1099s and other documents must be accurate, balanced, and reconciled. Many businesses perform monthly reconciliations of all accounts, which makes year-end reconciliation much easier.
Some businesses decide to perform this work only at year end, which becomes time-consuming and sometimes confusing. This one-time reconciliation process also makes the management of current business activities difficult because staff time needs to be refocused to meet filing deadlines.
Another problem with year-end reconciliations is that the current period financial reviews are often ignored, resulting in late billings, late payments, and a failure to review vendor price increases. In one such instance, a business owner performed the monthly financial reviews after they had completed the reconciliation process only to realize that three vendors had raised their prices two months earlier. Because the business had ignored the monthly review process to complete the tax filing process, they had failed to adjust their prices in a timely fashion, resulting in a significant loss of revenue. For this reason and others, it is never advisable to put off financial reviews.
Failure to plan for anticipated tax liabilities can have the costly consequence of a large tax bill at the end of the year. We review the financial activities of the business and calculate estimated tax obligations so the client is able to set aside funds throughout the year to pay for anticipated tax liabilities. In some instances, the client might decide to make certain purchases to offset potential tax obligations. This budgetary strategy avoids potentially massive tax bills at year end.
Helping Clients Avoid Problems
At Tom Vignali CPA, Inc., we offer a variety of bookkeeping services that prevent many of these problems. Clients who have engaged us to perform a one-time year-end reconciliation have found that it is more cost-effective to engage our services on a monthly basis to facilitate the proper documentation for filing tax returns. Additionally, it provides for a monthly financial review, which could identify cost or revenue issues as well as business management issues. Whether performed internally or by our staff, performing monthly reconciliations is a smart financial practice.
These are just a few of our observations as we attempt to keep our business and personal clients well prepared for the current year and for next year’s tax filings.
If you would like to further discuss these issues or any other accounting matters, don’t hesitate to contact us at: Tom Vignali CPA, Inc.
Contact Us:
Thomas W. Vignali CPA Inc.
118 Point Judith Road
Narragansett, RI 02882
T: (401) 415-0798
tom@tomvignalicpa.com
www.tomvignalicpa.com
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