Redesign your mental model: Use tax season to build better habits

We’re here to help you redesign your financial mental model—especially when it comes to tax planning. With these tax tips, you can revamp your financial habits and remodel your tax-planning strategies to take the pain out of next year’s tax planning.

When does tax season start? (and when does it end?)

Assuming a company’s fiscal year aligns with the calendar year, the tax season start date is January 1. By the end of January, inventories should be counted and W2s and 1099s should be sent out. This year, the filing deadline for corporations and LLCs is March 16. Sole proprietors have until April 15 to file their taxes. Get the scoop on deadlines for your 2019 taxes, or, if you’re struggling to stay on schedule, learn about filing an extension and whether your business qualifies. Each state has specific year-end tax filing timelines, so be sure to check your state’s department of revenue policies.

How long should I keep my tax records?

How long your business keeps its tax records depends on its filing situation. For businesses that file taxes regularly, the general consensus is to keep tax records up to 7 years. This article offers a summary of basic record retention rules. The IRS has specific guidelines on the matter.

What receipts and information do I keep for tax purposes?

For a business expense to be deductible, it needs to be “ordinary and necessary,” according to the IRS. You must keep receipts for anything you claim as a business expense. Take a look at these tips for staying on top of business expenses throughout the year so you save all the right information and paperwork without creating clutter.

Financial habits to lessen the pain

Most tax-season pain points can be lumped into a few categories most of us can relate to. Let’s address three of the most common tax-time problems—and ways to resolve them.

Problem One: Time

Complaint: “This task is too time-consuming and manual.”
Solution: Automate or delegate it.

There’s never enough time, it seems—especially for small business entrepreneurs. Expand your mental model to address this issue without having to do everything yourself. When it comes to tax prep, any task that’s repetitive, administrative, or simply takes you away from your core business strategy is a great candidate for automation or delegation.

Move the task off your plate by asking a few simple, if tough, questions:

1. What’s this task actually costing you?

Your time is valuable—especially as a small business leader. So, before you launch into detailed tax prep yourself, consider what an hour of your time is worth. Then determine just how much time the task actually takes: minutes, hours, or days? Is your doing that task really worth what it’s costing you to do it? Consider investing that time in something else with greater ROI or meaning.

2. Is your expertise needed to get it done?

Almost every task necessary to run a small business requires some know-how to complete. But not every task requires the level of expertise and know-how you possess. Think about the task at hand and the team you’ve hired. Could one of your employees tackle that task as well or even better than you, maybe at a lower cost? Have any of your employees asked for more responsibility or for a chance to try something new? What’s keeping you from passing the responsibility along to someone else? Keep your eyes open for members of your team to which you can delegate responsibility helping ease your workload and increase investment amongst your staff.

3. Could technology—an app or software—do it more efficiently?

Take a look at the apps and software you already have. Could the technology you have on-hand help? If not, what would it take to find an app or software to tackle the task? Maybe an employee’s time to research and set it up? An initial outlay of cash to purchase it?

Odds are, you’ve said “yes” to one or more of these questions. Even an “I don’t know” opens the door to possibilities. The key to delegating a time-intensive task is to open yourself up to new tactics, let go of hands-on control, and stretch your team in new directions. You might also need to budget some cash to cover the cost of software purchase and setup.

The Clover App Market offers plenty of tools that simplify and automate common tax-related tasks. Many come at low or no cost. Check these out for starters:

Sales Tax Reporting: DAVO Sales Tax is an app that automatically collects, files, and pays sales tax for you, and it comes with a free trial.
Employee/contractor W2s and 1099s: If your business has employees or works with contractors , you likely need to generate a plethora of tax forms just after the holidays. Apps like Gusto, TimeClock by Homebase, and Run by ADP are tailor-made to handle payroll and help you get tax forms out quickly and easily. And they offer either a free trial or a free version.
Business Data: Your Clover POS business data and Quickbooks could be syncing automatically, if they don’t already. Take a look at the Quickbooks app to start you on the path to automated bookkeeping.
Inventory: Simplify your annual and ongoing inventory management with Inventory Plus Plus, a cloud-based inventory management system that supplements your Clover POS with even more inventory-related capabilities, like setting up workflow automation or adding, removing, and editing inventory fields.

Problem Two: Expertise

Complaint: “I know I need to do this task for tax season, but I’m terrible at it.”
Solution: Outsource or delegate it.

You don’t have to be good at everything. You simply need to make sure your business runs as it should, and that the necessary responsibilities are met. When examining your mental model, stay focused on the things you do best and delegate or outsource the rest.

When delegating, start with your team. Determine if anyone has the ability to handle the task at hand. If not, reach out to other professionals. Keep in mind these two rules when it comes to successful delegation:

First, it’s okay to admit you don’t have the time, interest, or knowledge to be the expert at some aspect of your business.
Second, it’s smart to work with people who have different perspectives, abilities, and know-how to keep your business running at its best.

Take bookkeeping, for example. If you’re busy growing and running your business, you probably don’t have time to stay on top of Quickbooks updates, regular bookkeeping tasks, or even tax-related receipts. But that doesn’t mean you can’t keep your business books in order. Consider these ideas:

Use a mobile app like Tiny Scanner to help you and your team capture all business receipts on your smart phones.
Designate someone on your team as “receipt-handler” who collects and uploads all receipts to the accounting system.
Set up a business checking account with a debit or credit card exclusively for business expenses. Separating your personal finances from business funds is the key to accurate financial and tax planning for you and your business.
Hire an accountant for year-round support. If your tax accountant asks lots of questions about how you’ve entered info, get your accountant involved earlier in the tax process. Consider paying your accountant a small fee to double-check your books every month to help keep the numbers cleaner come tax time.

Problem Three: Priorities

Complaint: “This tax-related task is always on my list, but I never seem to get around to it.”
Solution: Prioritize it, or ask someone for help.

For most of us, tax season brings nagging reminders of financial habits and tax planning strategies we meant to jump-start for ourselves. Make sure that your mental model includes plans for growth and stability moving forward. Think about setting up a retirement account, an HSA, or an educational savings plan for example.

Whatever your chosen task is, start tackling it now, while the pain of tax prep is still fresh. Or table it until just after tax season or the down-cycle of your business. Be sure to enlist help getting educated. And remember to automate or delegate the task as much as you reasonably can.

Let’s say your task of choice is to set up an IRA. Consider outsourcing the setup to a financial advisor or use a robo-advisor for an automated alternative. Outsourcing or delegating the management of your IRA helps you reach your financial goals and stay free to do what you do best—lead your business.

The bottom line

As a small business entrepreneur, you don’t have to be the expert in every aspect of your business to create an effective business model or run a profitable company. You just have to be open to a mental-model redesign and know where and when to borrow brains.

Editorial Team

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