Tax time. These words strike fear and anxiety in many business owners.
What causes this fear and anxiety?
It could be many things, but preparation is probably the biggest culprit. It is easy to say, “oh, we have plenty of time to get ready,” but when you focus on your business and your customers, that time goes by much faster than you think. This is why year-round tax planning is so essential for accuracy and peace of mind.
What are some high-level steps businesses can take to become better prepared? Here are a handful of tips to help you survive tax time.
Get Your Paperwork Organized
This tip alone probably strikes fear in many, thinking about all the receipts, invoices, inventories, etc.
In today’s world, “paperwork” refers to actual papers and digital copies. If papercuts scare you, one option is to scan any paper records into digital documents and securely store them. Organizing digital files into folders can be done more quickly than shoving papers into manilla folders.
The point is to have everything as organized as possible for your accountant. This will not only speed up the process but also helps ensure accuracy.
Hire the Right Accountant and Communicate With Them
This is a combination of two related tips. If you don’t have an accountant or are in the midst of switching, make sure you do your due diligence and select an accountant with experience in your industry. This expertise is crucial not only when preparing taxes, but can lead to the accountant providing valuable recommendations for your business.
After you have hired the right accountant, don’t be afraid to communicate with them. Be open with them and ready to provide them with any paperwork or answers they may need.
This constant communication will provide a smoother tax experience and allow your accountant to know your business better, which will result in them being able to help your business with tax credits and deductions.
Keep Business and Personal Expenses Separate
As the saying goes, don’t mix business with pleasure. For business owners, this is especially true regarding expenses.
When looking at expenses, ask yourself if it is really business-related or not. Declaring expenses that should be regarded as personal as business expenses can lead to problems down the road, especially if the IRS requires an audit.
Look at each expense with a careful eye. If you aren’t sure how an expense should be classified, reach out to your accountant for guidance.
Have No Fear
Tax time can seem daunting to many, but it doesn’t have to be. These three tips are just a few suggestions that will alleviate stress when preparing your business’s taxes.
Your accountant is your best source of information when you have questions. Keeping your paperwork organized and expenses correctly classified will go a long way to help you and your accountant grab tax time by the horns.
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