NEW YORK \u2014 With the start of tax season, stress levels are rising at many small businesses.
Even owners who are organized, keep good books and stay in touch with their accountants can find compiling returns to be a painful process. One reason is that tax laws change often, says Rosamaria Bravo, a certified public accountant with the firm MBAF in Miami. One of this year\u2019s big differences: Partnership returns must be filed by March 15, a month earlier than in the past. And companies known as C corporations have a filing deadline of mid-April, after having a March due date in the past.
\u201cIt\u2019s very hard to stay on top of all the information,\u201d Bravo says.
Here\u2019s a look at some lessons small-business owners learned:
When Christina Divigard started an advertising agency, she bought accounting software and began keeping the company\u2019s books herself. When tax season arrived, she discovered that out of inexperience, she\u2019d incorrectly entered some information and misclassified some types of deductions. It took two weeks to get her books in order.
\u201cIf I had to do it all over again, I would have put more effort and budget behind setting up systems properly from the get-go,\u201d says Divigard, managing director of New York-based Valvespring.
Divigard subsequently hired a bookkeeper to help set up accounts and understand how to input income and expenses. She also learned more about the need to put expenses into different accounting categories \u2013 for example, meals during a business trip are different from meals to entertain customers under the tax law.
Having a system that is correctly set up has reduced the chance of errors, and even if Divigard has to do repair work, \u201cnow it takes me a day rather than two weeks.\u201d
Complying with tax law revisions can be hard even with a bookkeeper and accountant, Barbara Karpf has learned. As of this year, businesses must file W-2 forms and 1099 forms with the IRS by Jan. 31. While companies were previously required to give those forms to workers by the end of January, they didn\u2019t have to get them to the government until the end of February. The government can charge a penalty if it gets the forms late.
That created extra pressure for Karpf. Her home decor company, DecoratorsBest, moved offices in New York right after Black Friday and Cyber Monday, two of its busiest sales days. After she hired movers and a painter for the new space, she realized she needed to get information like Social Security numbers from eight people. Well into January she was still getting all the information together so 1099 forms for contract workers could get to the government, as well as the workers, on time.
Deborah Sweeney has learned to look at her books monthly to be sure expenses like charitable donations are entered properly.
\u201cThat way, we don\u2019t have to scramble at the end of the year,\u201d says Sweeney, owner of MyCorporation.com, a Calabasas, California-based company that helps businesses incorporate online.
Sweeney recalls errors of past years, such as not taking a deduction for a service contract on a printer. She has also learned to take her questions to her accountant to be sure she\u2019s not missing some of the finer points of rules. For example: \u201cHow do we categorize new furniture \u2013 do we write it off or depreciate it? What amount of an owner\u2019s health care costs is deductible?\u201d
Diane Hamilton, though, has struggled to find an accountant who\u2019s a good fit for her company, which makes computer and phone apps. She has worked with large accounting firms in the Richmond, Virginia, area where her Binary Formations business is located. But the bills climbed as she called with questions.
\u201cYou look at how much they charge and the amount of revenue you bring in, and it isn\u2019t working,\u201d she says.
When Hamilton switched to a much smaller accounting firm, she found herself doing as much work as when she tried to handle her taxes herself. She\u2019s still hoping to find the right tax professional for her company.
Brad Chandler estimates it costs his real estate company $70,000 a year to compile returns for the federal government and for Maryland, Virginia, and Washington, D. C. That\u2019s a five-fold increase in five years.
\u201cA lot of it is the sheer complexity of the laws, which are changing so much,\u201d says Chandler, CEO of Springfield, Virginia-based Express Homebuyers.
Occasionally, the company gets additional tax bills, which raise a question for Chandler and his chief financial officer.
\u201cDo we send it to our CPA (to handle) for $200 or $300 an hour, or just pay the bill?\u201d he says.
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