Don’t wait to file if your business is counting on a tax refund
In a recent statement, the IRS delivered ominous news, saying, “In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs.”
With tax season now open and that statement in mind, a few themes are emerging.
• The IRS is overwhelmed, playing catch-up from 2020 taxes and several pandemic-related programs.
• They are warning both individual taxpayers and businesses to expect delays.
• There are steps small businesses can take now to prepare.
If your small business is counting on a tax refund to keep cash flowing this year, here are a few steps you can take now to minimize the impacts of a refund delay.
Get started now
Get in touch with your accountant now to get your tax preparation started. The earlier your accountant can get started before tax season heats up, the better your chances of avoiding long-term refund delays.
Have everything ready
One tried and true way to delay filing is not having all your financial documentation ready for your accountant. Be meticulous in reviewing your financials for the year and contact your bank and lender(s) immediately if you think paperwork is missing or additional information is needed.
Have your financial house in order
It’s always important to have your financials in order, of course, but if your business counts on an annual infusion of cash flow from a tax refund, it’s even more critical to be prepared financially to avoid any disruptions to your operations.
If even after tidying up your small business’ finances you expect to face cash challenges, talk to your lender about these popular options to bridge the gap between now and when your refund does arrive.
SMALL BUSINESS LINES OF
CREDIT » Lines of credit are great for providing cash flow if your business experiences seasonal changes in working capital, or in this case, unexpected delays in needed cash flow. Lines of credit are also good for fast-moving business opportunities you want to take advantage of that your tax refund would have come in handy for.
SMALL BUSINESS EXPRESS
LOANS » A great option often used by small businesses that need quick access to working capital with the flexibility of going without a term in the form of a line of credit, or for short terms.
SMALL BUSINESS CREDIT CARD » Another option for reserving cash for the short term while awaiting your refund is using your small business credit card to keep your business’ operations humming. Speak with your accountant or business financial advisor to determine if this is a viable option for your small business, as you don’t want to rack up too much debt on your credit card if the IRS takes even longer than expected to deliver your tax refund.
Remember to use the expertise of your small business’ financial team, including your banker, accountant and financial advisor, to develop a short-term plan for cash flow that won’t disrupt your long term goals.
Jeremy Shackleford is senior vice president, director of small business sales for WSFS Bank. He joined WSFS in 2018 after nearly 20 years working in banking and financial services, and was most recently senior vice president, regional manager for WSFS’ Greater Philadelphia Market, where he oversaw 15 retail office locations. He also served 10 years as a member of the United States Air Force (AFSOC).