Table of Contents
Managing your own accounting can be a full-time job in itself. When you’re busy growing a business, thinking about tax time is something you may not want to deal with. Even if you hire an outside organization to manage your accounting and taxes, as a small business owner you’ll have to take some steps to prepare for tax season. Make it easy for everyone involved by streamlining your tax preparation this year.
Technology to Help with Tax Preparation
There is an app for just about everything these days. Make tax prep easy throughout the year by managing different aspects of your accounting through your smart phone or tablet. Receipt-filing software makes it easier to keep track of all those slips of paper. For example, Shoeboxed is one company that scans and organizes paper receipts that you mail in.
This takes the pressure off of you and frees you up to do the more important tasks that drew you into entrepreneurship in the first place. With Expensive, an app available for iOS and Android devices, users can scan their receipts and combine them into expense records. The app even integrates with your account statements. You can also snap photos of all your receipts and store them manually on your phone or computer. File them by date and it will be easy to find the records you need. Your accountant or tax prepared will appreciate receiving all of your expenses in an easy-to-manage format.
Checklists of Other Records
Purchase receipts aren’t the only records you need to keep track of before tax season rolls around; it’s important to track income, cost of goods sold and other expenses as well.
Most small businesses can easily create reports from their point-of-sale software. Keep all of your sales records, invoices and credit memos in one place. Keep a running total of your income as the year goes by so you’re not surprised come tax season. If you own a retail store that deals with inventory, you’ll need to track your inventory flow throughout the year.
Record the value of the inventory at the beginning of the year, monitor inventory purchases and add up the value of the inventory at the end of the year. Make sure you document any items that are removed for personal use or discarded due to damage. All of your expenses should be documented throughout the year. Below is a list of typical expenses a small business pays other than supplies and materials purchased at stores:
- Advertising and marketing costs, including printing of pamphlets and business cards.
- Utility bills, including power, water, trash, Internet and telephone.
- Travel expenses, including local parking and taxi expenses as well as hotel, meal and tip costs when traveling out of town.
- Professional fees, including consulting and accounting costs.
- Wages and payroll taxes.
This is not an exhaustive list. You should check with a tax professional to determine exactly what expenses your business should monitor throughout the year.
Don’t Make Mistakes
Dealing with tax season is easier if you do everything right the first time. Avoiding some common pitfalls can help things go smoothly when it comes time to file your taxes. One of the major challenges small business owners deal with is payroll tax. If you don’t deposit your payroll taxes correctly, you could end up paying IRS penalties.
Hire a professional to manage your payroll
Hire a professional to manage your payroll so you don’t have to worry about whether you’re processing it correctly. Another mistake commonly made by business owners is exaggerating deductions. If your expenses have increased significantly, you might spark the interest of the IRS. Likewise, if your expenses are significantly higher than other businesses in your industry, you could increase your chances for an audit.
What Is The professional Role
A professional will be able to help you determine which expenses can be deducted. Preparing for tax time doesn’t have to be stressful. If you schedule time each week to go through your records, file receipts, reconcile accounts and make sure your information is up to date, you won’t have to catch up at tax season. In addition, if you do come across a discrepancy, it will be easier to investigate when it’s fresh. Trying to figure out what went wrong eight months ago can leave you running in circles.