Tax Planning for Small Business Owners Why tax planning starts with current books

What current books mean

Your books are current when each month's bank accounts, credit cards and loans are matched to the statements, every deposit and payment is sorted into the right account, and owner draws and personal costs are kept apart from business expenses. Then the profit report shows what the business really made.

A bank feed that's connected but not reviewed isn't there yet. Feeds guess at categories, and one loan deposit counted as sales or one personal bill counted as an expense can move your profit by thousands of dollars.

Why the plan needs real numbers

Almost every planning move is sized from profit. Your S corp salary, your retirement deposit, your estimates and your year-end purchases all depend on what the business is making. If profit is off by $20,000, each of those decisions can be off too.

Current books also back up your deductions. If the IRS ever asks about a deduction, records kept month by month are much easier to show than a pile of receipts sorted in March.

How to catch up

If the books are a few months behind, start with the most recent months and work back. We match each account to the bank statements, fix the categories, and set up rules so the feed sorts most items correctly from then on. For most small businesses, catching up a few months takes days, not weeks.

If the books are a year or more behind, we scope the catch-up first and quote it as a fixed-fee project. You can start planning as soon as the recent months are done.

Keeping them current

Once caught up, the books stay current with a monthly close. We keep them in QuickBooks Online, send you a short profit report each month, and can build a simple dashboard that tracks profit against your tax plan. Then the mid-year check and the October review take minutes.

A worked example

Here's an example with made-up numbers. An owner's bank feed showed $95,000 of profit through September. Once the months were matched to the statements, a $15,000 loan deposit had been counted as sales, and $4,000 of business costs paid from a personal card were missing. Real profit was $76,000. Her estimates and retirement deposit were then set from $76,000, which kept her from paying tax on $19,000 she never earned.

Questions about the books

Can I plan before the books are caught up? We can talk through which moves fit you on the first call. The amounts get set once the recent months are matched.

Do I have to switch software? We work in QuickBooks Online. If you use something else, we talk about moving over on the call.