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Prepare to Prepare: A Business Owner's Guide to an Easier and Less Stressful Tax Time
By Gina Blitstein
Tax time: a period of examining your business' annual finances in detail and determining your fair share of the profits to Uncle Sam. Invoices? Logs? Reports? Spreadsheets? Notes scrawled on napkins or on the back of envelopes? Antacids? What does tax time actually look like in your business? Whether it's a frantic search for receipts and records or a dreaded and inconvenient, "day of reckoning" this guide will hopefully make this inevitable yearly duty a bit less complicated.
It's smart to hire an accountant to assist you in filing your small business' income taxes to make certain that everything is done properly. That being said, there's a lot you can do all year long as far as organization, recordkeeping and reporting that can expedite things when it comes to tax time itself.
Here are a few suggestions to make things go smoothly as you prepare for April 15 and beyond:
Set up an organized filing/recordkeeping system. Think of the old adage, "A place for everything and everything in its place." Nothing gets saved properly if there's no system or place in which to keep track of it. Don't just buy the filing cabinet or recordkeeping software; actually invest the man hours and effort required to set everything up for the easiest possible recording of your business' income and expenses. This exercise includes giving significant thought to the categories of tax-deductible expenses that may apply to your business and determining a means by which to capture and record that data.
Implement that system! A pile on your desk or a shoebox underneath it does not a filing system make. Think of the horror of searching through stacks of receipts and invoices to find just a particular record or two. What a waste of time! That time is better spent in the proper filing of the information in the first place. Although it's rarely an enjoyable or gratifying task, it beats the alternative by a long way!
Keep expense receipts! When in doubt, keep that receipt. If it doesn't fit into one of your pre-determined categories, put it in an "undetermined" category and have your accountant help determine if it qualifies as a legitimate deduction.
Some expense receipts and records you'll want to have available for your business' tax return include:
Business owners have unique considerations on their personal tax returns which include:
These are but a few of the basic records of tax-deductible items for businesses. Some additional tax preparation tips include:
The above tips will help you to have the information you need at hand for filing an accurate and complete tax form. Consult with your accountant early each year to learn if there's anything new you need to track in relation to your particular business and the way you work. Learn from past years what records you may have neglected to have available and make sure they're included moving forward. In addition, it's always enlightening to go to those in the know for information about taxes, so refer to these trusted sources for more in-depth coverage of the topic:
Filing taxes is a necessary part of running a business - but it needn't be a dreaded event. An important element of making your business tax preparation easier and less stressful is keeping complete records throughout the year. The key is to cover all the bases so that you pay all you owe and receive all the deductions you deserve.
How do you prepare for tax time?