CPA shares tricks of the trade for coastal small businesses
Ahead of this year’s tax season, we sat down with Sam Davidson, CPA, at Davidson Associates, who has been working with lobstermen and other coastal businesses for over 30 years. We covered common pitfalls that business owners often encounter and tips for how to prepare for a smooth tax season!
Q: How is it tax season again already?! What are some of the common mistakes that business owners make in preparing their taxes?
A: Not keeping adequate records. The more record keeping they can do, the less their accountant has to sort out, and that means it’s less expensive for them. Folks are distinctly knowledgeable about their business and their own products, but they are often equally distinctly unfamiliar with finances.
Ahead of tax season, understand the full scope of information, expenses and income, you have to keep. One of the most common mistakes is not keeping an automobile log, to track mileage while on the job: with date, mileage, and purpose of the trip. Without the log, you lose all, or at least a substantial portion, of this major business expense.
Q: What tips would you suggest for business owners ahead of tax season?
A: The single most important thing to do is to make quarterly estimated tax payments. Waiting to make one full payment after the holiday season makes coming up with the money really difficult. Just bite the bullet and make the quarterly payments; even if you can’t make the full amount, pay anything you can, it helps!
Each day or each week, organize receipts by category, such as fuel, bait, etc., and maintain annual files for each category. I would encourage folks get an online booking system, like QuickBooks, and to use it on a weekly basis to log income and expenses. Again, it saves you money not paying your accountant to sort through receipts.
The Island Institute sponsors free workshops on QuickBooks in remote coastal communities. To host one in your town, contact us today!
Q: When should someone think about establishing a relationship with a professional, like a Certified Public Accountant?
A: When anyone thinks about starting a business, I tell them there are three people they need to get: an attorney, accountant and insurance agent. There are many decisions that are made as you set up a business and these professions help you make good choices from the start.
If there are major purchases or changes you want to make, that’s when you should call up your accountant to discuss it ahead of time. Think about meeting with your accountant about year’s expenses before the end of the year; ask whether there’s anything you can do before December 31st to reduce your tax bill.
Q: Are there other resources for businesses in Maine?
A: I know the Small Business Development Centers provide a lot of free advising in addition to consulting. CEI also provides a lot of help, trainings, and start-up support for businesses.
Resources for Business Owners & Self-Employed
Explore these tools for taking the stress and frustration out of doing taxes:
- A great place to start for information and tools on preparing taxes is the IRS Small Business & Self-Employed webpage, including their Tax Calendar.
- Attend Tax Prep for the Self-Employed in Brunswick or Camden.
- For free workshops on QuickBooks in your community, contact us!
- Tools and templates are provided by Maine Small Business Development Centers.
Learn more about planning ahead to save time and money:
- CEI offers assistance to emerging and existing small business owners.
- Contact us to learn more about our Launchpad services for new or expanding businesses.
- The IRS provides tips for choosing a tax preparer.
- 7 Tips to Help Your Business Prepare for Tax Season by New Ventures Maine.
What We Do
The Island Institute’s Economic Development program provides bookkeeping, financial planning, professional development, and business planning services, to help entrepreneurs navigate the complexities of starting and growing a business. To learn more, feel free to contact Bri Warner.
Commercial Currents is for Maine’s island and coastal small businesses. To find archived editions, go to islandinstitute.org/blog/economic. Would you enjoy receiving these via email? Subscribe here.