It’s an undeniable fact that when we are pressured and stressed, we make mistakes. Waiting until the last minute or failing to be organized at tax time can lead to costly errors…errors that can result in missed opportunities for deductions and result in additional fees or potentially result in IRS fines if the errors are not caught.
Regardless of how well you’ve kept your small business (or personal) tax information in order this year, it’s never too late to start fresh with a proactive strategy for organization and preparation for the year ahead.
Try some of these strategies we accountants at Hayes and Associates advise our clients to take. Then, when tax season rolls around, you’ll be able to relax with confidence, knowing that your business is in order and you’re receiving the maximum benefits from your tax filings.
This Year’s Tax Time is the Best Time to Think about Next Year
As you prepared for tax time, have you found yourself thinking, “I really wish I had…?” or “It sure would have made things easier if only…?”
Pay attention to those thoughts, and don’t let them go to waste! The best place to start making positive changes to simplify tax time is to address the challenges and frustrations you’ve just faced.
Procrastination won’t help either. Be proactive and make preparations that will dramatically reduce your stress and save you time next year.
Gather Needed Documents in a Single, Secure Place
Paying taxes is a certainty, both personally and for your business. Here’s what you’ll need to collect for each.
Personal Tax Filing Documents
In general, the IRS is looking to identify who is on a tax return, what you’ve earned, and what deductions you can claim. Gather each of these documents to support your filing:
- Social security numbers of everyone who will be included in the filing (that includes spouses and dependents)
- Bank account and routing numbers, so that you can receive a direct deposit of any refunds.
- W-2 forms from your employers
- 1099 forms from banks, unemployment compensation, dividend payments, pensions, or retirement plans
- 1099 form for any contract-based work
- 1099-INT for interest payments
- Any other documents showing records of income, tangible and virtual.
Remember that numerous options for tax deductions may be available to you. In order to see if you qualify for any of them, look over the IRS Credits list and discuss your options with your accountant. If you create a file system to gather proof of potential credits and the relevant documentation throughout the year, when it’s time to meet with your accountant to file, it will be as simple as handing him the files.
Business Tax Filing Documents
Because of the many various structures of businesses our government recognizes, including: sole proprietorship, partnership, corporation, S corporation, and LLC, each one comes with unique and specific documentation. The IRS has put together a resource for each type of business structure that serves as a helpful checklist for your company’s needs. Don’t let all of the legal terminology intimidate you. Simply get in touch with your accountant to discuss any questions you may have.
Regardless of your company’s structure, you’ll need to provide:
- Business tax ID
- Accurate record of all income sources
- Record of all expenses: operations, marketing, inventory, employees, etc.
Gather the documentation in a single location and update it frequently. You’ll be glad you did.
Itemize and Categorize Business Expenses in Advance
If your business has a bookkeeper on staff, you likely already have this point well in hand, but if you are running a sole proprietorship or are just getting started, you may be trying to do the books yourself. Keep a clear ledger of your business expenses and keep them up to date. Remember to include:
- Start up and marketing costs
- Insurance
- Utilities
- Rent
- Company-owned vehicle expenses or mileage in a personal vehicle
- Office supplies, computers, and software
- Business events and travel expenses
- Continuing education and educational resources
As always, keep documentation that will validate each of these expenses.
Improve Your Record Keeping
Treat tax time preparation as a non-negotiable business (and personal) responsibility. By setting aside a couple of hours on a weekly- or monthly- basis, you can update records, add documents to your files, and check the accuracy of your expenses and income, moving deliberately and practically toward tax season readiness. Put that tax preparation time on your calendar and guard it against intrusion by other activities or procrastination.
Invest in Your Company
Have you been considering a computer system upgrade, new equipment, or another large expense? Don’t forget that these improvements can serve a double benefit for you. First, they will improve the performance of your company, reducing costs and generating additional income. Second, the cost can be reported with your taxes and potentially dramatically reduce your tax liability. If you’ve got the capital to do it and the timing is right, go for it.
Make a Difference in Your Community
Support your hometown team…as just one of the options for making a charitable donation. Help the Little League team with their jerseys- and see your business listed as a sponsor. Hang a banner on the fence at the high school football stadium, or you can support another worthy cause. Not only does your company increase its presence in the community- and attract other civic-minded customers, but you can deduct your contributions from your taxes.
Beat the Tax Time Rush: File Early
You can begin filling out and filing your tax forms just as soon as you have your paperwork in order. Oftentimes some forms, such as 1099’s, are not mailed until early February. Make sure you have all of your documentation on hand before filing to avoid errors or have to make adjustments to returns later.
Schedule your appointment and get assistance from Hayes and Associates early. The season can get extremely busy for us, and we want to be able to provide you with outstanding service and attention, providing you with accurate filing and answering all of your questions. If there’s one key takeaway we hope you’ll take away from this article, it’s a plan for tax time NOW. Make giving us a call today the first step in a new tax year’s resolution.
