I recognize our company is an outlier. Everyone here loves the busyness of January: closing out our clients’ year-end books and getting things ready for tax preparation. (To be clear, we don’t prepare taxes: our CPA friends do. We tidy up the books and make the final adjustments before our clients’ send their QuickBooks files to their CPA.)

We know this often doesn’t feel like a happy time of year for you. According to the non-profit organization SCORE, 40% of small business owners believe bookkeeping and taxes are the worst part of owning a company. Here are the major issues owners cite:

  • Financial cost (47%)
  • Administrative headaches and time (13%)
  • Complexity of compliance (13%)
  • Changing regulations and confusion (10%)
  • Paperwork (8%)
  • Inequity of the tax code (8%)

In addition, SCORE says most owners devote a significant amount of time to tax preparation:

  • 40% spend over 80 hours
  • 18% spend 41 to 80 hours
  • 15% spend 21 to 40 hours
  • 28% spend less than 21 hours

I’ve been through this annual exercise for 30 years. For half of that time I was on the tax preparation side. At NPS, I’m now the guy sending stuff off to the tax preparer. That means I understand both the giving and receiving ends of this situation.

With that in mind, here are two ways to save time, frustration and money this tax season—while endearing you to your accountant.

#1: Before Sending Your QuickBooks File for Tax Preparation

Here’s a short list of things your tax preparer expects you to accomplish. If you haven’t done these tasks before sending QuickBooks, expect to pay extra for your accountant to do this.

  • Reconcile your bank accounts through the end of the year
  • Reconcile your credit card accounts through the end of the year

If you want to earn extra credit from your CPA:

  • Make sure the payroll accounts in QuickBooks (wages, salaries, taxes, liabilities, etc.) agree with the payroll tax returns you filed
  • If you issued 1099s, double-check that your QuickBooks file matches the 1099 amounts
  • If you prepare your tax return on a cash basis (most of us do), be certain the cash basis balance sheet at 12/31 does not have any balances in accounts receivable or accounts payable

#2: What to Send to Your Tax Preparer

Keep in mind that CPAs are trained to look at the world through the balance sheet. So the accuracy of your balance sheet is incredibly important to them. This is why they often ask you for supporting documents. It’s not that they don’t trust you. It’s simply part of their job to collect corroborating documents. Accordingly, expect your CPA to ask for copies of these items:

  • December bank statements
  • Year-end credit card statements
  • Loan statements that show the end of year loan balance
  • Details (invoices) on any fixed asset purchase
  • Details on any fixed asset sale
  • Any other document that validates an account balance seen on the balance sheet

Why Clients and CPAs Love Us

In the middle of what can be an eye-rolling time, we get consistent praise from the accounting firms and clients we collaborate with. First, because we send CPAs a clean set of books. Second, because we usually anticipate accountants’ information requests and send the corroborating documents before they ask for these.

Tax preparation can be stressful and expensive for small business owners. I hope this list of tips reduces both for you. And if you’re ready to lower the pain of tax preparation—so you can focus on expanding your business—let’s talk about how NPS can assist you.

Wishing you positive cash flow.

[Source for SCORE statistics: https://www.patriotsoftware.com/accounting/training/blog/how-much-should-accounting-cost/]