If you are a small business and are not using an accounting software tool such like QuickBooks to help you gather information for yearly taxes, here’s a useful checklist of the top four things you should do before you turn your information over to your tax preparer:
1. Don’t wait until April 14.
Give yourself enough time to get your financial documents in order. If you haven’t done this by March 1st then call your accountant and file an extension. Don’t wait!
2. Gather all fiscal records.
Compile documentation for all your purchases, business expenses, income and records of transactions, pulling all your receipts, bank statements, cancelled checks and paid bills.
If you’re a small business owner who has a tendency to put some expenses (like for a home office) on personal credit cards, that documentation also needs to be gathered to ensure all business costs are captured.
3. Sort and categorize financial documents.
After you have collated your financial statements, sort and categorize each business expense; such as auto expenses, home-office expenses, utilities, medical expenses, office supplies and charitable contributions. That way the tax preparer can easily access the right numbers, feed them into a spreadsheet and run calculations to figure out deductions you may be eligible for. Related article: Deducting Business Expenses
4. Make sure all income is documented.
Tracking income is the area where small business owners can really get into trouble. You need to be able to say to your tax preparer, “this is how much money I made this year,” because if the Internal Revenue Service audits you, the figure must be 100 percent accurate.
The IRS doesn’t care if you fail to report all your business expenses but will pursue you for failing to report your income properly.
In Closing:
After you’ve filed your return, sit down and try to identify a better way of maintaining your financial records — not just during tax season but all year round, so that you’re not in this same situation again next year.
Make an investment into your business and purchase software such like QuickBooks or consider hiring someone to be your bookkeeper.
If you don’t have time to do a little bookkeeping each day, when will you find time to record a month’s or a year’s worth of records? The main benefit to hiring a bookkeeper is that it frees you up to concentrate on your business. It shouldn’t cost too much to hire a bookkeeper, and they are very efficient, often completing the tasks in half the time.