What Goes into your Business Tax Preparation by Innovative Accounting?

Murphy’s Law states:  “Nothing is as easy as it looks. Everything takes longer than you expect. And if anything can go wrong, it will at the worst possible moment.”

When it comes preparing your year-end business tax return, we agree there is nothing easy or simple or quick about the process, especially if approached in a thorough, detailed and organized way.  Innovative Accounting’s team has worked consistently over the years to streamline our process with various checklists based on the types of returns and specific tax brackets of each of our clients to ensure completeness and accuracy.

Still the process involved is somewhat complicated, laborious and ever-changing, as each year the tax laws and legislation are revised.  Thus, the time involved is lengthy as we compile, review and reconcile your year-end financial statements, and then have multiple members of our team and a CPA double and triple-check the accuracy of your final return.

There are many reasons to hire a professional CPA firm as a business owner, and on review, you’ll see the benefits greatly outweigh the costs involved. Let’s review some primary benefits.

Why Hire a CPA to Prepare your Business’ Taxes

1. Hiring a CPA saves you time, energy and stress.  If you tried to do your taxes yourself, it would take a lot of time, resources and more than bit of frustration.  If you’re not well versed on current federal, state and local tax laws, it would be wise to hire an experienced, knowledgeable and certified CPA who is required to stay up-to-date on tax laws and acquire continuing education credits for their license.
2. Hiring a CPA gives you peace of mind.  If you attempted to do your taxes yourself, you may be up at night pondering if your return was filed correctly or if in the worst case scenario, you may be contacted by the IRS due to errors or inconsistencies. You may also wonder if you found every tax deduction that you were eligible for or if you may have ended up paying more than necessary.
3. Hiring a CPA saves you money. An experienced CPA can maximize your tax deductions by identifying and ensuring you’re getting the refund you deserve or only paying what you absolutely have to.
4. Hiring a CPA offers year-round services. Not only do CPAs have experience with tax preparation and tax planning, but they can provide advice and insight rooted in your specific financial data.  CPAs are also qualified to keep a general ledger, prepare financial statements, offer monthly, quarterly, or annual bookkeeping, set up an accounting system, prepare financial analysis and in-depth forecasting, projecting and budgeting. They can also offer tax strategy and projections so that your final tax bill isn’t such a surprise.
5. Hiring a CPA will make your business more organized.  With your CPA advising and reviewing your financial health throughout the year, they will in turn improve your record keeping and improve the process of collecting and tracking your business expenses, assets and income in an organized manner. Not only will your record keeping be more organized, but you will also have a better idea of your past, current and future financial status, allowing you to make better strategic decisions for your business.

The Innovative Accounting Approach to Tax Preparation

With our streamlined and tax prep process, we hope to prevent any missed steps, avoid mistakes or as the Murphy’s Law states, avert anything going wrong at the worst possible moment. By giving you a sneak peak into our process, we hope to increase your confidence in our services, as well as assure of the value of hiring our firm to prepare your business taxes.

After we capture the data, records, statements and receipts to begin your tax return, we are not just plugging in numbers but spending an extensive amount of time analyzing your data, determining the best strategy to minimize your tax liability and maximize your return.

We prepare each tax return as if it was our own. We send out initial questionnaires, perform initial tax work, and then follow up with questions and try to identify any missing deductions, errors, or documents that might affect the accuracy or amount of your taxes. Additionally, we perform an extensive review process before filing each tax return.

Our Steps for Accurate, Thorough and CPA-Reviewed Tax Returns

Year End Reviews Included for Our Bookkeeping Clients

1. Bookkeepers do a full year end review
   1. Perform Balance Sheet reconciliations
      1. Perform Bank, CC, & Loan Reconciliations from Year End Documents
      2. Review any unreconciled transactions in bank register and address ANY unreconciled items
      3. Prepare list of Fixed Asset List to verify all fixed assets are accounted for and have not been sold or disposed of, or that any new assets are missing
      4. A/R & A/P Reports for client review & reconciliation
      5. Reconcile & Add Any Supporting Documentation for all loans & other accounts or verify balances with clients
      7. Upload Owner’s Equity Reports for client review & approval
   2. Review last year’s tax return for accuracy, client information and tax structure and assure that no changes have been made to the previous year’s financials in the accounting system
   3. Review payroll (if applicable) and ensure that the amounts match W-3 reports
   4. Review all transactions for the entire year in each GL account to check for errors and consistency
   5. Review S-Corp or Partner Compensation Is Broken Out
   6. Internal CPA Review of Financial Statements to ensure all reports are reconciled and/or verified by the client
   7. Review all QuickBooks Lists (Chart of Accounts, Products & Services) and make needed adjustments
   8. Create and compile draft Financial Reports: P&L, P&L by Month, & Balance Sheet on cash or accrual basis for CPA Review
2. CPA Final Review includes review current Year Reconciliations, Review & Reclassify Transactions for Year, Review Lists for Client, Review Financial Statements for Year End

Tax Preparation for Tax Clients

1. Tax Questionnaire sent out to clients
2. Preparation of Working Copy
   1. Add past year tax return to folder
   1. Ensure that all local taxes, LLC taxes, & properly tax forms are added as well.
   1. Review ownership of other companies & ensure any K-1s are added to working copy folder
   1. Add comments from client tasks to Working Copy
   1. Review client tax details on file from previous years and add to Working Copy
   1. Review any Tax Strategy work and add all notes from comments on tasks to Working Copy
   1. Review working copy for accuracy & completeness
3. Prepare Tax Return
   1. Setup tax return
   1. Complete Draft of Tax Return in Tax Software
   1. Add common forms:  General information, shareholder information, payments, penalties, and extensions, income,  Schedule K, Balance Sheet, Schedule K-1, Credits, LLC taxes, Local taxes, Property Taxes.
   1. Review all items
   1. Verify cash or accrual & financials and tax returns match accounting basis
   1. Enter & review fixed assets properly included on tax return & client has been asked if new fixed assets were purchased during this year, update depreciation information
   1. Review Transactions for each of the following accounts:  Tax Expenses, Gift Expenses, and Equity Accounts to ensure they are booked properly per tax laws specific to these transactions
   1. Review Officer Compensation has been categorized correctly
4. Tax return is reviewed by a different tax preparer and follow up questions prepared
   1. Entire tax return is reviewed for accuracy and completeness
   1. Review of Prior Year vs Current Year
   1. Review & Correction of any software diagnostics
   1. Prepare Follow-up questions to client using client tasks
   1. Tax return is updated based on responses from client
5. CPA Final Review of Tax Return
   1. Entire tax return is again reviewed for each data point on the working copy to the actual tax return by a CPA
   1. Review for overall reasonableness based on client information
   1. Review for Audit Red Flags
   1. A final list of questions is sent out to the client if necessary by the CPA
   1. Tax return is sent for signature
6. Prepare other taxes
   1. Verify Any Local  Taxes or Additional Tax Forms That May Be Required & Prepare
   1. Review & Prepare Property Tax Forms (if applicable)
   1. Prepare Client Tasks and update Financial Statements for any tax adjustments
7. Update and File Tax Return
   1. E-file tax return
   1. Send out any additional tasks, forms, and payments that need to be completed by the client with detailed instructions
   1. Receive accepted status(es) from the IRS
   1. Contact client via email to inform them that their tax return has been accepted

We know this is a very long, somewhat exhaustive list, and it may be hard to believe but we trimmed the bullet points by more than 75% to just focus on the main points so as not to include all the detailed procedures and tasks to accomplish each.  But the above list illustrates the detailed process to ensure accuracy, thoroughness, and detailed analysis that we feel is essential to preparing an accurate return. We invest a great deal of time, focus and attention-to-detail but it’s worth the effort to have peace of mind that each client’s tax liability is handled with care and fastidiousness.

As an additional service available to our bookkeeping clients, we also partner with a fantastic tool that updates your tax projections in real time based on the current performance of your company. We build your individual tax strategy based on your current tax projections and identify what you need to do before the end of the year to lower your tax burden as much as possible. Many of the tax strategies that can be used have to be implemented before December 31^st instead of before the tax deadline. This also gives you an estimated tax projection so that you can be prepared for what your tax bill will be next year instead of being surprised at the last minute.

Get Started Today on Next Year’s Taxes

Instead of waiting until the end of the year, know where you stand with enough time to plan for it. Additionally, you get access to your own Tax Strategy Portal, where you can view up-to-date information on your projected tax liability for the upcoming tax year utilizing your QuickBooks real-time data — allowing you to plan on an entirely different level.

Schedule your FREE Consultation with No Obligations.