Don’t be scared about business tax preparation, instead, be prepared.
It’s the last month of the year and your focus is probably on the holidays, not tax preparation. But there are some important things you can do now regarding tax prep that won’t cramp your end-of-year rush but will help you with the year’s tax information gathering.
Accounting Automation Is Key
If you don’t already have your bookkeeping and tax prep automated or electronic, it’s never too late to start. Having the right software can make the whole process take a fraction of the time and can really help you keep from pulling out your hair as you try to do last minute document and receipt gathering. Record keeping and bookkeeping with the right reporting can really make all the difference.
Review Your Deductible Business Expenses
It’s important to have records of all of your expenses and to review them carefully before including them on your taxes as business expense deductions. Remember, you have to be able to justify each expense as necessary to the running of your business.
Keeping separate tabs for the most common business expenses can be a big time saver at the end of the year. If you’ve been using a good software tool, this step should be just simple review and not a huge undertaking of entering all of those numbers now.
Some of these common expenses could include:
- Entertainment – keep track of where, when, why, and with whom in order to be able to use them as deductions. Keep in mind only about 50% of entertainment expenses
- Travel – mileage, airfare, hotel, and other expenses need to be accurately tracked. Keep it separate from personal expenses.
- Start-Up – there is a limit to the amount you can deduct for start-up expenses as well as restrictions on what it must be spent on. Your accountant can guide you.
- Home Office – if your small business runs out of your home you can deduct some of the office space on your business taxes. It is based on the fact that the space is used solely for your business, so keep that in mind.
Review Business Purchases
Every business requires investing in some type of equipment, though some need far more than others. Review your purchases over the course of the year to determine which and how much can be written off. There are limitations on costs as well as consideration of depreciation that need to be taken into consideration.
Think Ahead for Next Year’s Business Taxes
The end of the year is a great time to plan ahead for the coming year when it comes to your taxes. Talk to your accountant about ways you can prep for the year ahead by upgrading software, reviewing salaries and payroll, planning for big purchases and investments, fine-tuning documentation and reporting and implementing changes if necessary, and planning ahead for any business growth or changes that could affect your taxes. Planning for expenses or even for potential liabilities can save you, and your business, down the road when it comes to daily operations as well as tax preparation.
Now that you know what you need to ease your annual tax preparation, you can see why a good accountant is so valuable. They already have all of the information you need for your taxes and, on top of that, they have the knowledge and know-how to interpret tax laws to get the most benefit for your business without making comprises that could hurt you down the road. Compliance is key and there isn’t anyone better prepared to keep you and your business on the right track than a good accountant.
Call 888-743-3080 for a free consultation to learn how proper and proactive tax preparation can help your business.