4 Tips for Improving Your Tax Preparation Experience

Since April is over, you have probably finished your business taxes for the year. If so, you have earned a moment to take a big sigh of relief, but don't wait until next year to prepare for 2018's filing. You can remove much of your tax stress by beginning now to prepare your paperwork. By doing a little early planning, you can make next year's filing much less stressful and also make life easier for your tax expert.  

1. Keep Your Records Current

Business owners get into tax trouble with poor record-keeping practices. During a busy time at work, it's easy to have your invoices and receipts scattered into different computer files or, for some, stacked in piles on your desk. You need to invest in well-reviewed record-keeping software. A number of good programs are available, so ask your tax professional for a recommendation. The right software program can provide budgeting guidance and help you set goals to grow your small business in real-time. Accurate record-keeping not only makes tax preparation easier, but it also helps you to identify waste and gain efficiency in your processes.  

2. Keep Track of Large and Small Deductions

All too often, business owners lose track of "small deductions," which can really reduce your tax responsibilities. So keep records of everything, including petty cash. Petty cash disbursements can be confusing, particularly if you do not have a procedure in place to track these expenditures. You need to clearly define who is allowed to use petty cash and develop a proper invoicing system. Keep close track of your vehicle expenses because they can significantly reduce your tax payments. The IRS allows you to deduct operating expenses of business-owned vehicles and also deduct depreciation. Instead of deducting the expenses individually, the IRS lets you take a mileage rate deduction if you prefer. You will need to keep exact records for this option, including the dates of your trips, miles driven, destinations, and business purpose. If you are still paying off the vehicle, the payments can't be deducted, but the interest can be.  

3. Maintain Adequate Documentation in All Areas

Review how all types of documentation are being handled. Make certain that electronic and paper invoices are being stored and maintained, allowing you to claim all possible deductible expenses. If you only have a hard copy of this information, scan it into your computer and store the original as a backup. In addition, you need to monitor your payroll records. Check to make certain you have up-to-date payroll documentation for your employee withholding. Review this information midyear and then again at year's end to ensure you are prepared for April. Don't forget your sales and tax documentation. Review the amount of sales tax your vendors are charging on your purchases. Always have exemption forms on hand for the customers for whom you are not charging sales tax.  

4. Eliminate Personal Expenses From Business Accounts