5 Tips for Year-Round Tax Season Preparation
Preparing for tax season is not something that should be rushed and done as the season approaches. Tax preparation should be a year-round venture, especially when it comes to small businesses. Here are five very important tips for year-round tax season preparation so your small business is not caught off guard next tax season.
Keep All Documents In One Place
An important tip is to keep all of your company’s documents in one place. As tax season arrives you don’t want to be scrambling to find this receipt or that document. This can only hurt your chances at receiving as many deductions as possible as a small business owner. Keep all receipts and financial statements in one drawer and digitize them when possible. Even if you are able to digitally store the paperwork, do not trash the physical copies. Holding onto them is an added layer of security.
Project, Project, Project
It’s a good idea to project as much as possible throughout the year. This is done by looking at your financial documents throughout the year and not just when tax season arrives. Should your statements show an increase in sales, you will need to put a little bit more money away for tax time. Taking a look at the projections once per quarter will make tax season less stressful.
Keep Past Returns
All companies, even small businesses, should keep their prior tax returns. Keeping prior tax returns makes it easier for your business to plan for the future with the help of a certified public accountant or tax planner. Holding onto prior returns can also make it easier to file in the upcoming season.
Categorize Employees Correctly
Categorizing your employees correctly is an important year-round tax season preparation tip all companies should follow. Make sure that employees receive a W-2 come tax season and freelancers receive a 1099 when tax season arrives. These forms can easily be completed and mailed when using the help of a CPA.
Deduct a Business Car
Keep in-depth records if you wish to deduct a business car on your taxes next season. Many business cars might also be used for personal activities. That’s why you should always keep detailed records as to when the vehicle was used for work purposes and when it wasn’t. This can help differentiate between the two and make it clear to the IRS what part of the car you are actually deducting from your taxes.
This can also be done if your small business operates out of a home office. There’s a bit of a catch though; the home office must solely be for work and nothing else in order to deduct it on your taxes. This means you cannot use it for personal activities. The home office must also be your primary place of business in order to receive the deduction from the IRS.
If your small business is in need of tax preparation assistance, contact the experienced staff at Tobin & Collins at 201-487-7744. We have more than 50 years of experience in certified public accounting and consulting in New Jersey and the tri-state area.
*Content Updated: November 28, 2017