As we’re nearing the end of the year, it’s a good time to start thinking about taxes. Why think about taxes in October when they’re not due until April? Because even though it’s true that you still have 6 months before you have to file, the decisions you make before December can impact how much you owe or is owed to you. It’s much better to know now so you can adjust as needed before it’s too late.

As always, here’s my disclaimer that I am not a CPA or tax professional, but as a business owner I think it’s important to at least understand the basics of accounting and taxes and how all of it affects you.

I’ve said it before, but I encourage everyone to build a relationship with a solid CPA. Even if you are capable of doing your own taxes, the laws change all the time and it can be hard to keep up. They have to keep up to keep their licenses. And it never hurts to have a CPA’s signature on your tax return. I like to think it gives me an extra layer of protection. I trust my accountant to guide me in the right direction with my deductions and everything else.

For most of us, our fiscal year is January through December, meaning that’s the period we report our income and expenses to the IRS. So if we wait until March to start reviewing our numbers for the April deadline, it’s too late to make any changes that could help us financially. That’s why I’m talking about this in October. In a couple weeks, I’ll meet with my CPA to review where I’m at for the year, and he’ll make some recommendations for what I should do to minimize my liability.

Sometimes that means paying myself a higher salary. Even though that means I’d have to pay more in payroll taxes, it also means I could contribute more to my SEP IRA, and the return on that investment is more beneficial to me than the extra expenses. I file as an S Corp so I have to pay a salary. If you are a sole proprietor or LLC, that’s not the case since it all flows through to your personal return. But your accountant might advise you to spend some more money before the end of the year. Maybe it means buying a new computer or other equipment you need that will reduce your taxable income.

It’s a weird thing, right? I’m someone who likes to save, so if I have a really good year like this one, ideally I want to squirrel away as much as possible. It’s not my norm to think about how I can spend more. But if I don’t buy some things I need for my business, I’ll end up paying more in taxes. If I’m going to spend the money either way, I’d rather spend it on some stuff that will be useful instead of sending it to the IRS. And while I’ve heard accountants say you can’t spend your way out of paying taxes and believe that is true, my CPA has saved me quite a bit. If you find yourself in a position where you need to spend more at the end of the year, it means you’re doing well. It’s weird, but it’s not a bad place to be.

I’m often met with resistance when I recommend hiring a CPA, especially to people who are fairly new in business. The initial reaction is usually that it’s going to be too expensive and they don’t think they’re at the point where they can afford or need it. I beg to differ. My CPA always says if he doesn’t save me more than his fees cost, I should find someone new. It’s true. The costs might seem intimidating up front, but if you’ve done your research and hired someone reputable, it’ll pay for itself.

How do you find a good CPA? When I say you should build a relationship with one, I mean you want to work with someone long-term who will get to know you and your business and can better advise you. Someone at one of those big chain tax services won’t necessarily give you the same level of care, so I’d stay away from them even if the price tag is appealing. I’m sure they have great people, but I’ve also heard some horror stories.

I always think getting recommendations from someone in your industry is the best place to start. You want someone who understands the nuances of your particular business and has already proven themselves with someone you trust. I recently hired a new CPA based on the recommendation of a good producer friend. I did my research and scheduled a call to interview him before hiring him, but her referral had the biggest impact on my decision.

Yes, I interviewed my CPA before hiring him. It was more of a conversation than an interrogation, but I think you should always have a discussion with someone before agreeing to work with them. Think about what’s important to you and make sure that person is in alignment. If you don’t get the right answers or a good feeling, move on and find someone else. I think this should be the case with all working relationships, but it’s especially important when your money is involved.

I’ve been working with the same tax preparer since I was 18 and she’s been great. But the last couple of years, some things have shifted and I realized it was time to look at other options. I wanted to know if this new guy would be hands on, meaning if I’d be working with him directly or if I’d be working with someone else. And if it was someone else, would it be the same person or just whoever was available? Fortunately, they assigned me to a dedicated team, meaning he’s involved but there are also 2 others I can connect with if I have questions or need anything. They’ll be familiar with my account so they’ll be qualified to answer, not some random person who has to quickly look it over and answer me without knowing anything about me. That’s important to me.

I already knew he had experience with production. I also made sure the company and individuals are licensed in my state and other places from where I might want to work. I got an overview of their services and they said all the right things in terms of loyalty and building relationships, which you probably know are important to me as well. That conversation accomplished everything I needed, and I officially hired him the next day.

The best way to keep this relationship working for both of you, and something that is necessary as a business owner, is to keep up with your bookkeeping. It’s crucial to do this throughout the year. It will save you the stress when it’s time to do your taxes, because you’ve already done the leg work. Hopefully you’re using accounting software like Quickbooks or Wave Apps, or at least have some solid system in place, so all of your income and expenses are already categorized and tracked. Your receipts are attached or at least organized and saved in an easily accessible place. I do both. I attach my receipts to my expense transactions in Quickbooks and also save the PDFs on my computer and backup hard drives. If I ever get audited, it will be easy because my records are all right there.

As long as you’re up-to-date, you can easily send a P&L, which is a profit & loss statement, and a balance sheet to your CPA any time they need it. They can review, make adjustments, and advise you from there. If your books are a mess, it’s going to make it difficult for everyone so do yourself a favor and keep it current. I have only had positive relationships with accountants, mine and my client’s, because of this. I do my job and that makes their job easier. Everyone wins.

I do understand that bookkeeping isn’t everyone’s favorite thing and it’s one of the first to get put on the backburner when you’re busy working on things that actually bring you income. It’s fine when that happens, but prioritize catching up when you’re able, especially when nearing the end of the year. No one likes thinking about taxes, at least no one I know, but there are a lot of perks that come from owning a business, and you want to take advantage while you can.

Talk to your CPA towards the end of the year, ideally October or November. Let them review your books and advise you about what to do before December 31st to minimize your tax liability. Maybe that means you’ll get some fun new gadgets to play with, or the opportunity to invest in that software you’ve been wanting to use but thought was too expensive. Or maybe it means you’re already in good shape and need to keep doing what you’re doing. Either way, find out before it’s too late. Give yourself that head start so you can properly benefit from your business. And then maybe you won’t be stressed out when April 15th rolls around and you can do something better, like celebrating the birthday of your favorite Aardvark Girl.