Businesses & Nonprofits: #1 Bookkeeping Tip During Tax Return Preparation
Here’s the scenario: You submitted all your financial documentation to your accountant, and they began working on your tax return. Something happens which prompts you to adjust an entry in one of your accounts. Please pause and reconsider!
Once tax return preparation begins, it’s essential for businesses and nonprofit organizations to avoid making changes to their bookkeeping records. Here are some key reasons for not doing so:
- Accuracy and Consistency: Tax returns rely on financial information from a specific timeframe. Any bookkeeping changes made during preparation can create discrepancies between financial statements and the tax return, leading to potential errors.
- Legal Compliance: Tax returns must adhere to strict regulations. Once data is compiled, it reflects the organization’s financial position for that specific tax year. Altering records during this process may result in non-compliance with tax laws, which could trigger audits, penalties, or legal complications.
- Audit Trail: Modifying bookkeeping mid-preparation can complicate the audit trail. Auditors or tax authorities expect the records used in the tax return to align with the final figures. Bookkeeping changes made after submission may raise concerns.
- Delays: Adjusting books after tax preparation has started can cause delays in filing the return. The entire process might need to be revisited to include changes, risking missed deadlines and potential fines for late submissions.
To avoid these issues, businesses and nonprofits should finalize their bookkeeping before work on their return begins.
At Convergent Accounting we help our clients get their books in good order BEFORE tax time to put them in the best possible position. Our proactive approach makes us more than an accounting firm – we counsel our clients on a wide range of financial and management issues, resulting in better decision making and more confidence in their success. Click here to contact us today and find out how we can help you strategize and develop your business plan for success!
See also:
- A 2024 Mid-Year Checklist that EVERY Business Should Review
- How Better Bookkeeping Can Avoid Surprises at Tax Time
- Tax Compliance Tip: 1099 Income Reporting
This post is shared by Davis & Hodgdon CPAs as a service to our clients, business associates and friends. Recipients should not act on the information presented without seeking prior professional advice. Additional guidance may be obtained by contacting us at 802-878-1963 (Williston) or 802.775.7132 (Rutland).