CHICAGO — There can be a vast distance separating the skillsets of a successful self-service laundry owner and being knowledgeable in accounting. However, when it’s time to file the taxes for your business, this gulf needs to be bridged.
While this can be a challenge in the simplest of times, given the government programs set up in the last couple of years to help small and mid-sized businesses through the pandemic, navigating the divide has become even more daunting. Still, by paying attention, and seeking the help of professionals when necessary, laundry owners can take care of their taxes — and might even find some pleasant surprises.
Part 1 of this article reviewed COVID relief programs and their tax implications. Let’s conclude.
A NEW TAX LANDSCAPE
Even for laundromat owners who have owned their business for many years, the past couple of years can present challenges — and opportunities — they might not be aware of come tax time. Staying on “autopilot” could cost them money.
“A lot of business owners forget that they need to consider anything that they can reasonably justify as a business expense,” says CPA Sean Manning, the CEO of Payroll Vault, a payroll and workforce management company headquartered in Littleton, Colorado. “Now might be a really good time to go through their financial statements and their expenses. Has any of that changed? A good example would be launderers who are now doing more delivery. Did they have to buy a delivery vehicle? Do they have delivery expenses now that maybe they didn’t before? Did they modify their workspace or their building or their parking lot in order to accommodate drive-thru pickup?”
In this time when tax preparation can be more confusing than normal, filing an extension on your taxes to wait and see where things ultimately shake out might be a good strategy, he says.
“I tell clients that when there’s rapid change happening to consider the timing of when they file their taxes,” Manning says. “Because there’s been so much information recently, you may want to delay your filing with an extension. You still need to estimate your taxes and pay the taxes; an extension is not an extension to pay. But because there’s been so much information recently, if they are comfortable with the extension process, they might want to consider that in 2022 for their 2021 filing.”
BACK TO THE BASICS
Even with all the new terms and programs, there are certain fundamental steps that laundromat owners should pay attention to that will help both them and their tax professionals make the process smoother, says Samantha Rocco, a tax and estate lawyer with the Einhorn, Barbarito, Frost & Botwinick law firm in Denville, New Jersey.
“To avoid the stress associated with that last-minute scrambling, laundry owners should keep records for their business income and expenses organized and in a secure location throughout the year, rather than waiting until tax time to sort through that paperwork.”
Clear bookkeeping is everyone’s friend when it comes to taxes, Rocco believes.
“For each expense, the business owner should retain a receipt, and I would also suggest scanning the receipts so that they can retain a digital copy,” she says. “In addition, I would suggest creating a spreadsheet if the owner doesn’t already have one to track the business’s income and expenses. By doing so, the owner’s task of organizing their receipts will be a lot more manageable.”
Rocco has found that keeping current with tax information can save both headaches and heartaches: “By keeping track throughout the year, a laundromat owner won’t have to try and remember months-old expenses while feverishly looking through old papers trying to locate receipts when tax time inevitably rolls around.”
In fact, the very idea of “tax time” can be a misnomer, she says. It’s more accurate to think of the process as “tax times,” because many owners are required to pay estimated tax payments quarterly.
“Basically, instead of paying one’s entire tax liability in one lump sum, certain entities and individuals are required to pay their federal tax liability in four equal installments throughout the year,” Rocco says. “So, if a business is going to be required to pay estimated tax payments, I suggest making sure to put reminders in the calendar so that the estimated tax payments don’t slip through the cracks. If they do, that can result in penalties from the IRS.”
To keep everything running smoothly, Rocco says that it’s crucial for laundromat owners to maintain an open line of communication with their tax professional or accountant.
“There are some key questions they want to ask,” she says. “Ask them what information do they need from you to file your taxes, and what are the best ways to handle the depreciation of your business assets? Also, have the conversation every year to see if there any proposed changes to tax law that you should be aware of.”
A common mistake occurs when business owners mix their business and personal finances.
“When the owner and the business have one account or one credit card, it can lead to a nightmare at tax time,” Rocco says. “It becomes very difficult to determine which expenses were personal and which were business expenses. So, the best bet is to just keep separate accounts to avoid that confusion.”
And, while the vast majority of self-service laundry owners certainly don’t enjoy dealing with taxes, Rocco says it’s best to keep on top of them throughout the year.
“Don’t procrastinate when it comes to contacting your accountant,” she says. “Waiting until the last minute, as many of us know, will cause stress. And we want to avoid delaying payment of your tax obligations and avoid any penalties that may be associated with paying your tax obligations late to the IRS. That’s never a good thing.”
Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an attorney or tax adviser for advice regarding your particular situation.
Miss Part 1? You can read it HERE.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].