One big part of running your business is making sure that you’re meeting your tax obligations. A frequently misunderstood part of tax filings are tax extensions. You can use QuickBooks to effectively plan ahead and know what your tax liabilities are going to be so that you don’t get surprised with your tax liabilities at the end of the year. In this episode of MissionBusinessPodcast.com Bernard Roesch explains an overview of tax extensions and how to use QuickBooks to plan ahead for tax liabilities throughout the year.
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What Is A Tax Extension?
A tax extension is something you can use to extend the date of when you actually have to file your tax return. Standard and extended filing deadlines differ by the entity structure of your business and also whether you’re filing state or federal taxes.
- The main misunderstanding business owners have when it comes to tax extensions is that a tax extension only extends the filing due date. You still have to pay the tax liability at the time when you’re filing an extension.
- Many business owners want to use a tax extension to delay payment because they are surprised at the amount of taxes they owe at the end of the year.
- You can use QuickBooks to effectively foresee your tax liabilities so that this situation doesn’t happen.
Using QuickBooks To Plan Ahead For Taxes
You should not be surprised when your tax preparer tells you the amount of taxes that you owe. If you have QuickBooks set up effectively, you can see this in advance and plan accordingly for your tax liabilities.
Below are a few important considerations to use QuickBooks effectively to track your tax liabilities:
Cash basis versus accrual basis accounting – It’s important to configure QuickBooks properly for either cash basis or accrual basis accounting. If you configure QuickBooks using the wrong type of accounting method, then your tax liabilities might not be tracked appropriately.
Track expenses appropriately – It’s important to track your expenses appropriately within QuickBooks to understand the profitability of your business. But it also impacts your ability to forecast tax liabilities.
- For example, if you track specific salary expenses appropriately, then your tax preparer will be able to understand your tax liabilities related to your salary so that you can effectively forecast that liability before the end of the year.
Providing data to your tax preparer – Once you have QuickBooks structured appropriately, you can provide deeper data to your tax preparer to help them forecast your tax liabilities and also potentially decrease your tax liabilities before year end.
- For example, your tax preparer can run specific reports within QuickBooks to see data that impacts your tax liabilities. They can then use this report to help you make adjustments before the end of the year, such as bonus payments or other tax-advantageous activities that will limit your tax liability.
Navigating the complexities of taxes with QuickBooks – Taxes are a complicated topic, and it’s important for you to work with a professional when it comes to tax preparation.
We Can Help You
If you need support setting up QuickBooks to fit your workflow and to help with tax planning, contact Bernard today. Bernard can help you configure QuickBooks in a way that meets your business needs while also coordinating with your tax preparer to ensure they have the data they need throughout the year.
You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.
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