Hopefully you made it through this past tax season with minimal damage and hassle and have everything on track to do so again during the 2010 tax season. If so, great for you, but you are in the minority, particularly among fitness professionals. Like it or not, tax day is going to be a permanent part of your life... and a very important one at that. From my experience, both as a business owner and a business coach, we make it much tougher than it has to be, if for no other reason than we like to give our tax prep the “out of sight, out of mind” treatment. Chances are, as you were laboring through the last couple of months of the season, working with your tax prep professional, gathering info, filling in the blanks for them, handing over a shoebox full of receipts, you thought to yourself, “I’m gonna make a few changes for next year and make sure this is done right!”
And if you had to go through that process AND cut a check to pay additional income tax, I’ll almost guarantee you wanted to do things differently!
You’re right for thinking that way. So many of those issues are caused by our lack of a process or system that will keep track of that information over the course of the year, instead of you having to go back through an entire year’s worth of deposits in March. So while we kick ourselves every year and plan to make changes every year, as soon as the check is cut and the taxes are filed, we go back to our old selves! We don’t pay any attention to those changes that were soooo important until the same time next year. Out of sight, out of mind, right?
Do yourself a favor. Let’s make things easier on you for next year. Let’s put some small things into place that will not only make your life easier, but save you more time and more MONEY!
There are three areas you need to consider and change your thought processes on when it comes to not only tax time but your finances in general. These are:
- How your time is affected
- The precedent of accountability
Adding “tax prep” to our to do lists is hardly exciting, and you didn’t sign up to be a CPA. If you have a professional who you trust, empower him to do as much of your accounting and bookkeeping as possible to minimize your time commitment to those areas. However, knowing that you need a CPA isn’t where most fitness professionals falter. Actually, they are usually quite quick to hire a CPA, almost as a scapegoat, so they can tell themselves (or their business coaches) that they are running their business properly. What they then neglect is the need to educate and converse with the CPA so they may do their job properly. CPAs may not always be the most fun people to talk to, but they’ve got to understand how your business needs to run. Otherwise, you’re always going to be re-doing their work with them, putting out small fires or fixing mistakes that didn’t need to be made. Look at it like this: would you hire anyone else and just turn them loose in your business without any training whatsoever? And you probably didn’t have as strict of a screening process for your CPA as you would for hiring a fitness professional. So it’s safe to say that without taking the time to educate your CPA on your business activity, essentially you are hiring someone without screening, interviewing and training him and expecting him to do a job. The consequences to your business can be as dramatic as if you’d followed the same procedure to hire a new fitness professional.
Do some research before you hire your CPA. Get recommendations from people you know who have experience with different CPAs and firms, and look to them first. Then schedule an informal "interview" with them. You want to know of their experience in fields similar to yours. Most importantly, you need to make sure you take the time early on to train and educate them on your business. It’s a time investment up front on your end, but it will reward you many times over with time saved down the road.
By nature, CPAs seem to be detail oriented. They do, however, have a lot going on within their own business, and if you tend to be the thorn in their side by not getting them the information they need, you’re giving them added opportunity to make mistakes. Inaccuracy or noncompliance can be expensive and can cause a lot of problems for you if your filing is incorrect. It’s important that you discuss with them on-going any compliance issues with all local, state and federal laws and particularly changes in tax law. There are modifications to tax laws each year, and many of them can affect you immediately.
Planning is another very large component of what your CPA needs to bring to your business. Much of the true benefit from having a good CPA is actually delivered through his planning stages for your tax preparation. This is where a lot of your money can be saved or lost. Talk to your CPA about your long term goals, both personally and professionally, and tell him you want to plan for that future, starting right now. Consider hiring a pro if you have questions about your existing retirement accounts or would like to develop a retirement plan.
The Precedent of Accountability
This is primarily a personality characteristic, but it’s one that turns into a problem really quickly. You can only expect your CPA to treat your business as seriously as you treat it. Remember, your interaction with him, with anyone really, is setting a precedent for him to possibly do the same. So if he asks you to come in and sit down with him to go over some information he may be missing, then you need to handle it as a high priority. If he needs info, you get it for him. If he needs it promptly, you get it promptly. Don’t be late, don’t arrive without information, don’t reschedule and don’t put him off. Treating his needs as an afterthought or a low priority for you may give him the impression it’s ok to do the same. Most good CPAs are probably going to do their job to the best of their ability anyway, but think of it like this: if they know getting information from you is going to be a painful, drawn out experience, do you think that’s going to affect how they approach it? Of course it is. Again, treat your interaction with the CPA like you would an employee. You’re going to set the best example of how to do whatever needs to be done. That’s a great practice for every avenue of your business and personal life as well.
Of course, there are other areas and much more detail you could go into with regards to tax planning, finances in general or just good business practices. For the vast majority who dread this side of their business, these three points are a good start to getting on the right track and making this side of the business easier on you.