Tax season only comes once a year. It's during this time that small business owners try to get as organized as possible so that they can correctly make an accounting of all their finances and expenses from the previous 12 months and receive the maximum tax deduction.
The only problem with impromptu tax preparation is that you can easily make mistakes that may get you and your company audited. It's far better to stay organized in the offseason so that you don't have to stress when April rolls around.
The following tips can help you keep your records and bookkeeping in order throughout the year so that you don't have to dread tax season.
Don't Mix Business with Pleasure
If you're self-employed or own a business establishment, you can probably testify to the fact of how easy it is to buy things for your personal life with business-related income.
Whether it's something as simple as a toy for your kids or a piece of furniture for your living room, using business capital to pay for personal items is inadvisable because you can't count them as a deduction.
It's far better to establish two spending accounts - one for your personal life, the other for the business - so that you don't have to worry about any crossover.
Keep Receipts So You Can Itemize
It's a good idea to keep all of your business-related expenses on file by holding on to invoices and receipts.
It helps establish what your margins were from the past year when determining how much profit you made, but it may also help you maximize your tax deductions.
Though there's nothing necessarily wrong with a standard deduction, you may miss out on some savings by not itemizing. Holding on to receipts can make the itemization process much easier and give you credits that you didn't know existed.
Hire or Consult with a Tax Specialist
Taxes are nothing if not complicated. Tax specialists and financial experts who go through years of training would admit to this.
While software products have made the filing process a lot easier, it can still be hard to decipher what rules apply to you and which ones don't. For this reason, you may want to consider consulting with an FBC tax professional.
FBC can not only offer advice on what to look for when preparing your taxes but can help with the itemization process, which when done right is the best way to go for maximizing your refund from the government.
Spread Out the Work
Some chores are best done all at once, but because of the quotidian nature of running a business, the best way to keep your finances in order is by doing a little at a time.
Every day, for 20 to 30 minutes or so, devote a portion of your time to arranging your finances. For instance:
• Label and file your receipts
• Make an accounting of the revenue you generated over the past week
• Set up your budget for the coming month
Doing a little bit at a time can spare you from the headache of leaving everything to the last minute.
For more helpful suggestions, speak to an FBC tax professional.