Keeping track of your taxes is important. If you’re not careful, you might have surprises when your tax payments come due and that can negatively impact your business.
In this episode of MissionBusinessPodcast.com, Bernard Broesch is going to share how you can plan ahead for taxes owed and how to use QuickBooks to keep track of tax information.
If you have any questions about this podcast episode, please feel free to contact us.
The Typical Tax Tracking Process
With most businesses, the business owner keeps track of upcoming payments in a semi-manual way.
- You have paid your taxes in the past, and you use that as a baseline for what you’ll probably owe this year.
- Throughout the year you keep track of how the business is operating, and if the business grows significantly, then you know you’ll owe more taxes.
- If the business declines during the year, then you may end up owing less taxes.
The problem with this approach is that it’s fairly subjective, and could cause problems in your business if your financial situation changes significantly. Also, in many cases business owners are not very disciplined with keeping track of upcoming tax payments and setting money aside, which can lead to serious cash flow issues when tax payments are due, or large penalties for missing tax payments because there wasn’t enough money to pay.
How To Use QuickBooks To Track Taxes
There are a number of features within QuickBooks you can use to track upcoming tax payments to ensure you don’t have cash flow issues in your business.
- Log upcoming quarterly tax payments in QuickBooks. When you file your taxes for the previous year, you should get an estimated quarterly tax schedule from your accountant for the next year.
- Use these quarterly tax payments and input them as bills in QuickBooks so this amount shows up as a bill in your account’s payable reports.
- When you run your accounts payable reports throughout the year, if a tax payment is coming due it will appear in the account’s payable report so you can plan ahead for cash flow.
- Throughout the year, review your financial reports in QuickBooks to understand if there’s changes in the business that will impact taxes.
- Review year-over-year financial metrics to see if the business has grown, and if so, plan on paying more in taxes to accommodate for this growth.
If you see that the business is declining and you expect that to continue for the entire year, then work with your accountant to know how much less you should pay on your taxes. It’s important that you work with an accountant to understand the specific numbers so that you do not underpay the taxes owed.
QuickBooks Tax Tracking Help
It’s important to get effective tracking of upcoming tax payments in place for your business, but this can sometimes feel complicated and unneeded since it’s not urgent until tax season.
If you need support getting this set up, as well as other financial reporting and processes in your business, contact Bernard today. You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.