The first time I prepared my own taxes, I was blissfully unaware of what a W-2 was – until the forms arrived a few weeks after I mailed my return, sporting numbers that didn’t quite match those I pulled from my pay stubs.
Next skill learned: how to file an amended return.
Tax season brings out the best and worst in people. Some wait by the mailbox for W-2s, eager to file when we know a tax refund awaits. Others — often those who can least afford it but are in greatest need of cash in hand — pay exorbitant fees for “refund anticipation checks” that put cash in our hands only marginally more quickly than filing online.
On the flip side, some dread the day we pay and put it off until the last minute. Unfortunately, small-business owners whose bookkeepers never told them about paying quarterly estimated taxes or who think it’s easier just to deal with taxes once a year too often wind up paying a premium through an underpayment penalty.
The bottom line is: Who cares most about the money in your pocket? You. So if you want to maximize the money you keep for yourself and your business, you need to know the numbers.
Enter the fear factor. If you’re never willing to make a mistake, you may wind up accepting someone else’s mistakes. Put down the need for perfection and ask for what you need. Sounds simple? It’s often the scariest step for new and longtime business owners alike: the leap of faith toward taking charge.
Countless clients come through my door saying, “I’m just not good with numbers.” Those already in business often add, “That’s why I hire a tax preparer.” But your responsibility doesn’t end when you delegate the financial details, and women and men face the same challenges if they don’t check the numbers.
One client I worked with brought all his records to a professional to file his tax return. Several months later, when he came to Women, Work, and Community for input on his business plan and financial management, we noticed that his tax return failed to account for his cost of goods sold — in this case, thousands of dollars of automotive parts he bought as part of his car repair business. A small mistake makes a big difference in your bottom line.
To protect your pocketbook, you need to be in control. First, know your numbers. From good record-keeping to proper planning for profit goals and tax payments, as a small-business owner, only you can truly steer the ship. Even the best accountant can’t create a mileage log or manufacture receipts out of thin air. If you’re not keeping track of the numbers and looking at the big picture, your boat will not float for long.
Second, educate yourself. None of us is born knowing how to read a balance sheet, but all of us can learn. Help is out there: fact sheets and webinars at IRS.gov; classes with Women, Work, and Community; Small Business Development Center counselors; and professional accountants. By asking questions and making sure you understand the input, output and bottom line of your business, you put yourself in charge whether you decide to do it yourself or delegate at tax time. Taking responsibility from top to bottom for your own financial planning helps you and the professionals with whom you work, often saving money and time on both sides.
“We encourage our clients to contact us prior to year end to avoid any surprises at tax time,” said Barbara McGuire, certified public accountant and manager at Chester M. Kearney CPAs, with offices in Houlton and Presque Isle.
Finally, take the helm. Nationally, the U.S. Bureau of Labor Statistics reports that women represent 73.8 percent of tax examiners, collectors and revenue agents; 65.9 percent of tax preparers; and 61.8 percent of accountants and auditors. If they can do it, so can you.
Now is the time: The tax woman cometh. Take control of your business finances, and get help where you need it. Believe in yourself and your ability to take charge. It’s not as scary as you think.
Erica Quin-Easter is microenterprise coordinator for Women, Work, and Community in Aroostook County, where she provides training and technical assistance to clients from Sherman to Fort Kent. Entrepreneurs are invited to register for WWC’s free “Easy Steps to Business Tax Prep” training by calling 764-0050 or emailing firstname.lastname@example.org. The training will be held 9:30-12:30 April 4 in Fort Kent, April 5 in Houlton and April 6 in Presque Isle.