Do you need to reduce costs and make sure you’re on target for business goals? Want to get ahead on this year’s taxes? A midyear tax check in will help you accomplish all of these and more. Let’s see why.
What is a midyear tax check in?
A midyear tax check in is a thorough internal audit in which you assess your current cash flow, projections, expenses, and other current finances to see where you stand going into tax season. In doing this, you’ll also discover any new liabilities and likely new ways to conserve your resources. The goal is to prepare in advance for filing taxes to make your final tax filing more streamlined. But there are additional major benefits to doing a midyear tax check in too.
What are the benefits of conducting midyear tax check in?
Besides saving time and stress when it’s time to file taxes, a tax check in is a great way to refine business strategies and make sure your finances are aligned effectively. This is because you’re actively checking for how your business is generating and using funds in real-time. While you should always be monitoring your accounting, a midyear tax check in has the added focus on tax filing so you’re accomplishing multiple things at once. Here’s why a midyear tax check in is so beneficial:
- You’ll be more prepared for when tax season arrives
- You’ll identify potential tax liabilities earlier and have time to address them
- You may discover new deductibles you can take advantage of
- By reviewing expenses, you may find areas to reduce costs
- By examining your income throughout the year, so you’ll see how your business is performing
- You’ll discover details needed to develop stronger business strategies to increase revenue
- A midyear tax check in confirms whether your current budgets are working or not effective
- You’ll improve financial organization
- You may find savings opportunities
- A tax check in helps you see whether you’re still on track for major and minor business goals
By conducting a tax check in, you really have nothing to lose and it’s a great way to be proactive with your financial health. If you are concerned in any way with company finances or with meeting goals, this is an opportunity to find ways to strengthen your company’s position. This is also a chance to establish new goals and key performance indicators to enhance operations.
How to conduct a midyear tax check in: 6 key focus areas
Individual organizations, Certified Public Accountants (CPAs), and tax professionals will have different methods to perform a midyear tax check in. However, the process concentrates on assessing the amounts, changes, and trends of your finances. By examining shifts in cash flow and the circumstances influencing them, you’ll see how you can account for these in taxes. You also pinpoint areas of your business you can make actionable changes to. Here are the six areas and steps to follow for a tax check in.
Examine receipts and spending
One of the core areas of your financial life cycle is how you spend money. You’ll want to document expense information that’s up-to-date in order to be presentable should official audits take place. Remember, accuracy is key.
If you find that you need to update or properly allocate your expenses, that’s fine! This is normal and it’s one of the goals of the review.
Collect as much expense data as you can and make sure you note what areas of the business they are being generated from. This will allow clear filing when you go to really do taxes and you’ll be able to plan how to report them. Receipts and expense reports will also indicate where you can potentially reduce costs.
Make sure you’re consolidating accounts appropriately
A midyear tax check in is important because it forces you to make sure your accounts are clearly defined. For example, if you’re the business owner, this is the time to make sure you’re classifying payments to the appropriate category, personal or business, and in the right ledger. This is also important for defining the types of expenses and revenues you’re generating.
Document and track changes
Have you increased employee salaries? Are you generating more revenue or expenses? Have certain operational costs increased or diminished?
These are things you need to monitor and report, not only for tax purposes but for you to be aware. As a business leader, these changes indicate how your company’s money is entering and leaving your hands – this is something you need to control.
Failing to do so could mean missing out on tax savings. Or, you could simply be over budgeting or not applying your funds where they need to be.
Everyone loves deductibles, but over-relying on them can be expensive when tax season arrives. In order to really lower your taxable income, you need to clearly define and report your income accurately, and you’ll want to clearly distinguish how revenues are then reinvested in the business.
This is why making sure expenses are allocated into appropriate accounts is so important. Equipment purchases and things like marketing or advertising costs should be identified and documented in order to be listed as deductibles.
You’ll also want to note the results of these business costs, like an increase in income as a result of expanded outreach or perhaps more productivity if you’re hired new staff. Consulting a tax professional would be a wise investment to help you sort these details out. And this, of course, is deductible too!
Review revenue streams
Revenue is a critical component of cash flow that you will need to monitor and document. If there are changes like increases or decreases, these should be noted. Seeing where revenue changes are coming from can help you boost how you bring in the money.
It’s also critical for the tax process that your income be clearly documented. Use the summer months to make sure this data is clear and up-to-date. Remember, increasing revenue can also increase your tax, so this helps you plan ahead.
Start making estimates
Whether you make quarterly estimated tax payments to the Internal Revenue Service (IRS) or keep a running estimate of what you’ll owe in taxes, these help you avoid an unexpected tax bill!
Depending on your business circumstances, quarterly estimated payments could alleviate pressure and time demands come tax season. But either way, estimating these tax costs prepares you for the tax payments, reducing stress and impact.
Again, tax or accounting professional consultations can help.
See How Temple Management Can Help
The summer months can be busy and coupled with the tax, legal, and financial knowledge needed to conduct a midyear tax review effectively, you may want to use professional accounting services. Professional CPAs like our team at Temple Management will examine your finances to help you manage, update, and categorize your accounting details appropriately for a painless tax review.
We’ll also help you forecast tax amounts and plan for circumstances that can affect your tax season. We can even take the entire tax filing process off your workload completely. As we conduct your midyear tax review, we’ll explain the direct impact of your finances and help you implement strategies to achieve all your goals! Don’t hesitate to learn how you can save money and make the most of your tax review. Please contact us here, or give us a call at 770-892-2087.