New Year. New Taxes: 5 Tips To Master Tax Season
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New Year. New Taxes: 5 Tips To Master Tax Season

When it comes to entrepreneurship, there are few things more panic-inducing than tax season.

Each year, business owners are overwhelmed with the mounting demands of calculating expenses, searching for receipts and specifying deductions. And all of this stress comes with praying they won’t owe too much or hoping they can break even. So, for many, the beginning of the year isn’t just about “new year, new me” pressure. It can also be a time of great finance-related distress.

However, the people at Xero know it doesn’t have to be that way.

Filing and preparing taxes is the most adult thing anyone can do, and Xero recognizes that it can be a smooth, seamless process provided you have the right tools. As a leader in the digital accounting sector, Xero provides key resources for every business owner to thrive and be prepared when tax season rolls around.

Here are a few things Xero wants you to remember to help take the stress out of tax season.

Preparation Is Key

There’s a popular saying: “If you stay ready, you don’t have to get ready.” This sentiment rings even truer for anyone preparing for the hustle of tax season. Having a single place to store and collect documents is a big part of the process.

You’ll also want to have clear financial records. What did you spend money on? How many invoices were sent out? Having a place to store documents and keeping regular records of business expenses is vital for small business owners. As an entrepreneur, you should endeavor to have a good, clean set of books to help tax season run more smoothly. 

To alleviate the administrative effort typically put into this task, Xero has an integration with Hubdoc, a simple tool to easily capture documents, extract data, match to bank transactions and digitally file for easy access.

Understand Your Position

Tax season is always a little easier when things are set up efficiently. Knowing your financial position will provide clear insight into how you navigate the filing process. To better understand your financial position as a small business owner, consider financial analysis that includes:

  • Reviewing financial statements like income statements and balance sheets
  • Identifying business ratios to help monitor your liquidity, profitability and efficiency
  • Determining cost/profit analysis to help discover the true cost of providing your product or service and the optimal operation level for your business

Another way to have clarity around your financial picture is by connecting your bank to Xero and setting up bank feeds. When you set up these feeds, transactions flow into Xero for easier reconciliation and help provide a more precise account of your financial position. Having financial reporting at your fingertips gives you the insights you need to make important business decisions, and it will put you in the best financial position ahead of tax season. 

Uncle Sam Makes the Rules

Between the changing presidential administrations and updated IRS policies, keeping up with all the new tax regulations can be a little overwhelming — and sometimes not readily available! That’s why it’s good practice to keep an eye on the IRS website at the top of every year for any changes that may affect your business and filing status.

The year 2022 has already come with its fair share of changes, and you should know what to remember when filing. If it all seems like Greek, don’t be ashamed to ask for help. Tap in with one of Xero’s certified advisors, who can help you navigate everything that goes into understanding the ins and outs of tax season.

Relax. Tax Season Is Not Forever

While tax season can be stressful, you don’t have to let it overcome you. During this tense time, ensure you’re prioritizing your mental and emotional health. This puts you in a better position to mitigate the challenging environment that may come over the next few weeks and months.

During tax season — and more broadly — don’t overthink, procrastinate or neglect your self-care. No matter how daunting the season may be, well-being must be something you take time for. And remember to have faith. Filing may seem like a lot, but it will all get done.

Whether you’re a sole proprietor or CEO of a small business, Xero specializes in helping you run your business with ease. By taking advantage of tools that make closing the books a breeze, you’ll master all of the nuances and strategies of this tax season (and many more to come).