Small businesses must deal with a tremendous amount of paperwork having to do with the government, including documents that pertain to tax authorities, applicable government agencies, etc. In fact, burdensome paperwork tied to government regulations is consistently one of the top frustrations for small business owners who end up spending way more time (and therefore money) dealing with it than they would prefer.
A recent survey1 of 1,000 small business owners, conducted by the National Small Business Association, found the two "most burdensome" regulations for small business were the federal tax code and the Affordable Care Act (commonly referred to as "Obamacare"). While change appears to be in the pipeline under our country's new management, 44 percent of those polled said they spend 40 hours or more each year dealing with new and existing federal regulations, and that doesn’t include handling paperwork from state and local agencies. More than one in three said they spend more than 80 hours a year. Having a solid routine in place can help you cut down on these hours.
Clearly, business owners could use some advice on how to better manage their government paperwork. After all, they generally don't have the resources and manpower set aside to adequately deal with it in the way larger businesses do.
Have a general plan of action.
For starters, it helps to have a plan for how and when you will deal with all the necessary paperwork. This will involve researching and tracking deadlines, setting reminders, and carving out blocks of time as needed. If you'll be handling it all on your own, you'll have to find ways to keep this time from conflicting with other important tasks and day-to-day operations. If you intend to have an employee or contract worker handle it, you'll need to make sure they have all the information needed or are able to obtain it and clearly present it to you.
Braden Perry, a regulatory and government investigations lawyer, advises business owners to put together a master plan that includes a detailed regulatory and renewal calendar. "The plan should also include an overall policy and procedure that covers all regulations that apply to your business," he says. "Once this is fully implemented, compliance costs go down significantly because your business will be in a proactive position rather than a defensive one."2
It's also a good idea to have a regular routine as part of your overall plan. This should involve a schedule of checking in with applicable government agencies to ensure that you are up to date on all the latest regulations and requirements. As you probably know, these can change a lot, making it difficult to keep up.
Business owners have indicated that the complexity of regulations has been a massive drain on their time. Developing a routine can not only help you keep current with everything, it can also save time. Once you have a habit formed for where to check for updates and how often, you will spend less time hunting and instead get the info you need more quickly.
Always be prepared for a potential audit.
Being prepared for a potential audit can save you time and a lot of headaches. Most businesses (and people in general) dread being audited, but if you're well-prepared, there's no reason to worry.
In case of a tax audit, make sure you thoroughly understand your numbers and how you reached them. If you had someone prepare your tax returns for you, get in touch with them and have them answer any questions you have. You want to understand everything completely so when the time comes to speak with an auditor, you will know exactly what to say and what to point out. Make sure you get all your checks, receipts, and other relevant documents organized and ready for reference.
"Neatness counts," says Nolo's Frederick W. Daily.3 "Forget about dumping a pile of receipts before an auditor and telling him or her to go at it. Messy records mean more digging — and more digging, to the IRS, means more gold for them. Conversely, auditors frequently reward good recordkeepers by giving these folks the benefit of the doubt if any problems arise. Neatness builds your credibility with the auditor. Tidiness and order appeal to an accountant's mentality, and most auditors are accountants."
The same technique applies to audits from other government agencies, whether it’s your state sales tax agency, workers’ comp authority, or property tax division. Make sure your records are easily accessible and all numbers are backed up with proper documentation.
Nobody likes dealing with paperwork, and government paperwork adds a whole other layer of stress and frustration, but managing it all doesn't have to be as hard as it seems. Mostly, it just takes some good preparation, and you can save yourself a great deal of time (and therefore money) by remaining organized and keeping track of what you need to appease the government agencies.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.