While we’ve kicked off a new year, it’s time for your annual reminder about the importance of closing 2021 financials and getting started on your business tax return…as quickly as possible!   The months of January to May are extremely active for business transactions.  Following the holidays, prospective business buyers and their capital are on the hunt for target acquisitions.  Yet, incomplete or delayed year-end financials and tax returns can significantly frustrate the process.  The businesses that are prepared with year-end reports and completed tax returns have the highest probability of a speedy transaction.

Furthermore, U.S. business-for-sale transactions have rebounded since their low in Q2 2020, nearly a 14% jump back in 2021 against ongoing COVID-19 fallout, hiring challenges, and supply chain disruptions. Transactions accelerated 28% in Q4 2021, eclipsing the pre-pandemic levels of Q4 2019, bringing optimism for a strong 2022. So if you want to catch the business transaction wave, it’s time to take action.

There are additional benefits to closing the previous year’s financials and filing taxes EARLY.

  1. Eliminate tax deadline stress. Any time you face an unpleasant task, it’s best to get it out of the way as soon as possible. Taxes are no different. You have to fill out the forms and file them, so grit your teeth and get it done.
  2. Protect refunds from identity thieves. According to the Government Accountability Office (GAO), the IRS estimated that online tax fraudsters stole $1.6 billion through identity theft tax refund fraud in 2016. 2  Filing early helps to ensure your true SSN or FEIN has been registered with IRS before an identity thief has a chance to file it for you.
  3. Make a plan if you have a tax bill. If you are surprised by a tax bill, it’s better to know about it early.
  4. Secure timely access to your tax professional. You may have found out the hard way that it’s tough to get on a good tax pro’s schedule during peak season. Avoid an extension or paying a higher fee from your tax professional. Instead, schedule an appointment with your advisor as soon as possible.
  5. Get your financials in the hands of buyers. If you are planning to or are in the process of selling your business, you want to avoid losing time or even a potential buyer by delaying the release of your year-end financials.
  6. Move on with your planning.  It is challenging and less effective to forecast, budget, and plan for the upcoming year if you are working with year-old outdated financials.

If you are considering a sale this year, close out your 2021 books as soon as possible. To a buyer, proof of strong 2021 financial performance will be the most important indicator of business viability. Ask your CPA to be on the list of ‘on-time filers’ rather than file with an extension. Discuss with your CPA.  And please, call GAI to schedule a valuation consultation and learn how we connect local businesses to buyers from around the country.