Why New Entrepreneurs Should Never Procrastinate on Their Taxes

BizAge Interview Team

Taxes are like the weather—inevitable, sometimes unpredictable, and often with the potential to ruin your day if you're not prepared. Honestly, is there anyone who actually enjoys doing this? Probably not! But with that said, even though tax season is a time that everyone dreads, it’s something that still needs to be done. But for entrepreneurs, tax season can be particularly stressful- especially if you’re just starting out. 

You have to keep in mind that business owners (even technically people with side hustles) all have numerous financial responsibilities, and the landscape of tax regulations is ever-changing. Honestly, it's easy to see why folks would procrastinate until the last minute. 

Again, this might be even worse when you’re totally new to all of this. But the thing is, you’re shooting yourself in the foot if you take your time on this. There's a high chance you might forget something, not put in the right info, or even miss opportunities. But this isn’t just it; there are plenty of other reasons, too. So, with that all said, here’s exactly why you really can’t wait until the last minute to do all of this!

The Anxiety will Keep Building Up

So, it’s not exactly a surprise that procrastination and anxiety tend to go hand in hand. Just think about it for a moment; waiting until the last minute to tackle your taxes can result in a whirlwind of stress and panic. Again, like what was said earlier, there’s the chance of forgetting something, like forgetting to apply for an FEIN online (which makes filing more challenging). This is just an example, but you can expect to be in a giant scramble to gather documents, decipher receipts, and try to make sense of your financial records. Again, this giant scramble will only lead to mistakes, so it will probably occur more and more often. 

Taking that out of account, it isn’t good for your mental health either. Each day that passes, that tax deadline is only going to loom over your head more and more, and the anxiety it causes from procrastination is just not worth it in the slightest!  

You Need Time for Strategic Planning

It might be easier said than done, but tax season shouldn't be viewed as a mere administrative chore (granted, it feels like one)—it's also an opportunity for strategic planning. Just by getting your taxes in order well before the deadline (ideally a couple of months prior if you can), you'll have the time to assess your financial situation and explore tax-saving strategies. 

There are so many things within a business that take a lot of time, and when it comes to your financial situation, that takes a massive amount of time. So you might need to do things like restructuring your business entity, implementing retirement plans, or optimizing your deductions, but in general, early preparation allows you to make informed decisions. Honestly, this alone can actually benefit your bottom line in the long run.

There’s the Aspect of Penalties and Interest

This is something that would immediately destroy a newer business owner or one that seems to be struggling. These penalties, and the interest especially, can be really bad. You do not want to owe back taxes! So, the best way to avoid either of these situations is to file and pay on time. If you fail with both of these (even if it’s one day later after the deadline), then this can result in costly penalties and interest charges. 

Just about every tax authority worldwide doesn’t take tardiness lightly. Plus, these late filing penalties can accrue daily until you submit your return, leaving you to owe more and more money to the point where you might not even be able to keep up! By procrastinating on your taxes, you risk financial penalties and compromise your cash flow by accruing unnecessary interest expenses.

Potential of Missing Out on Credits and Deductions

It’s not just NGOs or corporations with the best accountants that get deductions; even your business, like other small businesses, can get these, too. In fact, you’re even entitled to various deductions and credits, and all of these will help you minimize your tax burden. Now, that’s the good news, but the bad news is this can’t be rushed in the slightest! 

It takes time to identify and claim these tax breaks, and you need to keep in mind this requires careful planning and documentation. If you’re procrastinating on your taxes, you may overlook valuable opportunities to reduce your taxable income and maximize your refund. Needless to say, that’s not worth it, right? You just don’t want to leave money on the able if you don’t have to, and if you’re doing this all at the last minute, that’s basically what’s happening to you! 

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Written by
BizAge Interview Team
April 6, 2024
Written by
April 6, 2024