Tax time can be tough for small business owners, especially if you procrastinate and end up making a last-minute dash to the filing finish line. But you can alleviate the stress of scrambling to meet tax deadlines by preparing throughout the year. As mentors to America’s small businesses and a resource partner of the U.S. Small Business Administration (SBA), SCORE recommends a few goals for getting organized and ready for tax season.
Make Your Tax Preparer’s Life Easier
At tax time, your tax preparer is your best friend. He or she is going to take a year’s worth of income statements, expense reports, deduction lists, receipts – and so much more – and make sense of it all, and then file it accurately so your business complies with all the necessary IRS requirements. The more you can do to make your tax preparer’s life easier, the better job they’ll be able to do for you and your business.
“Whether you opt to file your own tax returns or hire someone to help you, it is a good idea to keep separate books and records for your business and personal expenses,” recommends SCORE mentor Richard Kroger. “That way there are no surprises when you review expenditures months or even a year later as part of the tax filing process.”
Stop Storing Receipts in Shoeboxes
Streamlining your business practices has a lot to do with helping you remain organized all year long. Eliminating as much paper from the process as possible is one of the best ways to do this. The IRS accepts digital copies of receipts, so there’s no longer a reason to hold onto paper ones. There are several cloud-based tools out there to help you make the leap and leave paper receipts behind.
Organize Your Paper Records
Even after digitizing your receipts, it’s hard to go completely paperless – think of your original copies of important documents like signed contracts and other agreements. Start by keeping the number of hard copies you store to a minimum and organize paper documents in a portable file box. This will help you keep only what you need. Bring these paper documents to your accountant’s office when you meet at tax time.
Take All of the Deductions Your Business is Eligible For
If you’re not taking advantage of every deduction your business is eligible for, you’re likely leaving money on the table. Most business-related expenses – like office supplies, employee meals, mileage and loan interest – are fair game when claiming deductions at the end of the year. Even many startup expenses are deductible.
Use a Business Credit Card for Expenses
Tax preparedness is about getting organized and automating as much of the process as possible. The less manual legwork, the more time you’ll have to spend generating revenue for your business. One of the best ways to organize your business expenses is to use a business credit card.
Most business credit cards automatically organize your purchases into different categories, making them easier to track. And, you have the added backup record of your credit card statement each month should you need to provide the IRS with documentation of the expenses you’re claiming.
File by the Deadline
Filing on or before the April tax deadline is critical, especially if you have estimated quarterly payments to submit. Missing deadlines and filing late will quickly attract the attention of the IRS and increase your chances of an audit.
Spend Time on Taxes Every Week
Just as you can’t expect to stay in shape if you only exercise once a year, you can’t expect to stay on top of your taxes if you only make them a priority during tax season. Taking just thirty minutes at the end of the week to reconcile your books, electronically file your receipts, plan for quarterly payments and more will get you organized and ready for next year’s tax time.
Getting your business taxes organized is easier with guidance from someone who’s done it themselves many times before. By working with a SCORE mentor, you’ll have the support of an experienced professional who can guide you through the tax preparation process and help you be prepared for tax season.
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