4 Tips for Improving Your Tax Preparation Experience
SARAH JAMES, ACCOUNTING MANAGER
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, it 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
You will save yourself much time and stress if you use your business accounts only for true business expenses. If personal expenses creep in, you complicate the entire deduction process and doom yourself to hours of sorting through your expenditures.
Remember, lenders or potential buyers will be put off by finding personal expenses in your financials. You better maintain your credibility if you keep your personal needs away from your business.
Following these steps throughout the year will keep you from being stressed at tax time. Your tax advisers will be able to quickly prepare your returns and escape some stress themselves. Daily attention to these tax tasks makes life easier for business owners.
ABOUT THE AUTHOR
SARAH JAMES + ACCOUNTING MANAGER
Sarah James is an Accounting Manager at Lutz with over five years of related experience. She focuses her time on tax preparation and planning for individuals, partnerships, and corporations.
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Hastings Young Professionals, Member
- Certified Public Accountant
- MBA in Accounting, University of Nebraska, Kearney, NE
- BSBA in Accounting, University of Nebraska, Lincoln, NE
- Philanthropic Educational Organization (P.E.O.), Past Member
- Child Development Council of Adams County, Board Member
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