Preparing for Tax Season 2023

No Comments

In the previous blog, we talked about the Federal Reserve minutes and the economic outlook for the rest of the year (https://paarmelis.com/how-we-got-here-and-where-were-going-business-outlook-2023/). Overall, my prediction was a flat year. I expect there will be a downturn for the first two quarters, followed by a good second two quarters. Today, I’d like to help make your life (and hopefully your accountant’s life) easier. Here are some tips for tax season to help you get through as smoothly as possible.

BUSINESS: Two important words? QuickBooks & Balance Sheet.

Bank Balances

This one is easy. Almost everything you need is in your QuickBooks file. First, go to QuickBooks and double check your balances. Go through all your bank accounts and make sure the balances match as closely with QuickBooks as possible. These won’t completely match because of things like checks clearing, etc… I might expect some discrepancy of perhaps a few thousand dollars here or there. What you shouldn’t see is a discrepancy of $100,000 or $50,000, an old check, or duplicate check that wasn’t voided. I recommend that if you see figures like these, double check with your accountant and possibly let them void things so it doesn’t impact other aspects of your taxes.

Accounts Receivable Balance

How much do your clients owe you at the end of the year? To get this balance, pull up your shop software and reconcile the final number with QuickBooks. If you do have a small balance from people not paying, write offs, warranty items, etc.. that is typical. If you have a lot of adjustments to your accounts receivable (say in the range of $50,000), it might be something to go over with your accountant. If this number ends up being accurate, I suggest doing a check every quarter. If you don’t believe you’re going to get paid, write off the accounts receivable balance because you will pay tax on whatever is in there.

Inventory Balance

The lower this number is, the better. Also, accuracy is key. If something is in inventory, it was not deducted as cost of goods sold. Get rid of inventory that’s dead or won’t sell so that you’re not paying tax on it. The higher your inventory is, the higher your income is going to come out. Double check your inventory balance before you send it to your accountant. If you have an accountant that doesn’t understand the automotive industry and your report is $35,000 in inventory (but it’s not accurate), They will likely leave that on your income report, leaving you owing around $8,000 more in taxes.

New Assets Purchased This Year

Look at your fixed assets accounts and verify that everything is accurate and on your balance sheet. If it’s less than $2,500, then it is probably on your Profit and Loss sheet. Make sure when you find inconsistencies or inaccuracies that you go to your accountant with the corrections. Ultimately, verifying this can save you money and educate you on what you might be missing in your shop.

Accounts Payable

This is everything that you owe to your vendors. If you put your vendor bills into QuickBooks, make sure you have December invoices from vendors in there accurately so that you get the deductions! If you’re not sure, double check the items you bought and clear with your accountant that everything is accurate.

Loan Balances

We verify both the line of credit balances and the loan interests for end of year in QuickBooks. Verifying both numbers help us see the principle ending balance so that we don’t miss any pieces. You are not only making sure that your financials are accurate, but you’re also making sure that you have all your loans listed.

Draws and Distributions

If you have a bookkeeper, you need to double check that there aren’t any deductions that need to be made. Even if you do your own books, make sure everything is categorized correctly. Your personal expenses should also be in draws and distributions. If some of your shop expenses are in draws and distributions, you won’t get deductions for them!

Income Statement

What I typically do is compare 2021 to 2022 side by side with a third column to show percent change or dollar change. I am looking for outliers. The fixed expenses are the biggest things to mark for inconsistencies. Making sure that there aren’t any huge differences or, if there are, finding a logical explanation for them.



Let’s move on to personal taxes. Personal Taxes can be a little trickier because they vary much more greatly than business taxes. Here’s some tips for personal taxes that should still be able to help.

Personal and Business Taxes Should Be Done Together

We ask our clients to all their core information together for themselves, and that will signal us to get started. The reason that we do these together is that personal taxes can help to answer questions about your business taxes. If I must guess about personal taxes and I turn out to be wrong, I will have to potentially amend your business taxes. The #1 thing we try to avoid is having to amend things.

KEY DATES: March 15th and April 18th

March 15th is when S Corporations and Partnerships are due. Unless you’re already set with your personal taxes as well, we’ll automatically extend your business taxes because S Corps and Partnerships don’t owe taxes, it all comes out of your personal tax. The tax deadline is April 18th this year (Some states are due March 15th so double check with your accountant). Get your items in by March 31st at the very latest. This gives us enough time to be thorough. If you owe money, you need to pay April 18th. You can file an extension, but you will be paying interest for late tax payments.

How To Send in Your Documents

If you are mailing your documents in, make sure you have some form of tracking receipt with UPS, Fedex, Etc… Snail mailing leaves no options to fix a situation where your taxes are lost in the mail, not to mention protecting your personal information.

If you are sending things in via fax or scan, understand that if you can’t read something, we probably can’t either. Make sure everything is clear and readable.

If you are emailing, please don’t send 35 different emails with pictures attached. Attach them all in one file or a document.

The bottom line at Paar Melis is that we want to work on your taxes in a way that is easiest for you. So, if you find email, fax, or scan frustrating, go ahead and mail it!

What to Send

Most things are common knowledge if you’re a business owner such as W-2, mortgage statements, investments, etc… However, for itemized deductions, here’s a couple things to note;

Medical expenses: To deduct them, they must exceed 7.5% of your AGI (Adjusted Gross Income). If you’re on the threshold, go ahead and send your balance and leave it up to your accountant. The only time you might need to send more than your balance is if you have exorbitant medical fees your accountant needs to double check.

Charity: I don’t need receipts or letters for this either unless it’s a massive amount of money that we need to verify. The best thing to do is have documentation for yourself so that if you ever need to recreate the itemization for the IRS, you can.

Childcare: All we need is the EIN of the provider and how much you paid them. Usually, a school sends an end of year letter with all this information. If you are paying your caretaker under the table and they don’t want their social security number on your taxes, give your accountant a call and try to figure out if you need childcare included on your taxes.

Schedule of estimated tax payments and when they were paid: All we need to know is who you paid, when you paid, and how much you paid.

HSA (Health Savings Account): How much did you contribute? If you pay outside of payroll, just let your accountant know the amount you put in and expenses paid out.

IRA (Personal): Your accountant needs to know how much you put in. If you didn’t put any in this year, double check with them if it’s smart to contribute before April 18th. Remember, with Personal IRA’s, you can fund up to April 18th and have it included on this year’s tax return.

Rental properties: Usually, we can just pull this from your QuickBooks file but if you don’t have one, go ahead and tally up your rent you received and the expenses you paid. You might be able to just send your mortgage statement. All I truly need is a Profit and Loss from QuickBooks or a very basic one you can make yourself.

Small Business or Side Business: I just need Profit and Loss. If you’re not sure what you should be counting as expenses, go ahead and send your P&L to your accountant or just give them a call for some guidance.


The bottom line is that if you can get things done early and you are going to get money back, you will get it a lot faster. If you are going to owe money, it’s always better to know sooner what you’ll owe. Since the tax bill is due April 18th, this might give you some time to prepare.

To hear me talk about this list in Audio Format, check out episode 48 of “Business by the Numbers” here: https://paarmelis.com/business-by-the-numbers/.


Accessibility Toolbar