You just picked up a letter from the IRS in your mailbox. You want to believe they’ve written you a thank you for last year’s prompt tax remittance. After you snap out of it and open the letter, you realize the IRS will be trudging through your return from three years ago. Three years ago was year 2 of your business—the year you tripled your income. You have no recollection of the return, the CPA who prepared it, much less where you put your copy of the return and the paper trail that supports it. You are in the middle of the biggest quarter yet in your business, and of filing your last year’s return and now this happens. A dark mental cloud has now taken up residence in your once focused mind.

Preparing for a tax return can halt an entrepreneur’s forward motion in an instant. There is just something about the ultimate taxation organization looming over your head that saps the energy right out of your money-making mind. So, before the New Year begins choose a strategy and put it in place. There are only two choices, really: the do-it-yourself plan or delegate plan.

Option #1: Delegate
This option is for you if you are willing to let go and rely on someone else’s ability to keep your records straight. This does not mean to abdicate—you are still responsible to manage the system, or in this case, manage the keeper of the system. But, you no longer have the mundane task of filing each piece of paper and data entry. As the business owner, you are responsible for occurances like your assistant not doing something correctly, which leaves the burden on you, the owner.

Carefully choose the delegatee, and then build the system together. If you cannot help build it, at the very least sign-off on the system they design. Learn to navigate the system first with their assistance, then without it. You are ultimately responsible to the IRS, so be sure you are comfortable with your system.

Option #2: Do-it-yourself:
Choose this option if your budget is tight or you simply want to own it yourself. Realize with this plan that you will need to be out of money-making commission for a period of each month as you tally and reconcile. This will happen again during the year when deadlines arise and the CPA needs some revised reports run or newly crunched numbers.

Pull out your calendar and schedule with yourself the following times:
1)      ½ day before the year end’s a time to build system
2)      ½ day a month for all of 2010 to log, report, and file the month’s business activity.
3)      2-4 meetings with your tax preparer to be sure your system is tracking all it needs to.

Now that you’ve chosen your plan and can see a different future, let me re-write that story:

You just picked up a letter from the IRS in your mailbox. You don’t hesitate to open the letter since you know you can catch any curve ball the IRS throws your way. The letter says that they will be examining your return from 3 years ago. Three years ago was year 2 of your business—the year you tripled your income.  The plan that you’ve deliberately developed to deal with taxes will allow you to weather this tax examination during your biggest sales quarter ever with ease.

Ah, feels good, doesn’t it?