Most people dislike tax seasons, even accountants. Since most business owners despise doing taxes, they tend to procrastinate and do it at the last minute. However, this can lead to making mistakes as well as leaving you open to tax penalties. Ideally, regardless of how you may feel about filing taxes as a business owner, you should make it your resolution to keep things organized so that you’ll be prepared when trader tax status season rolls in.
1) Receipts
Ensuring that your business runs efficiently is primarily based on how organized you remain throughout the year. One way you can streamline your business practices and become organized is to eliminate as much paper as possible. Based on the fact that the IRS accepts digital scans of receipts, there really is no reason to rely on paper recipes anymore. In fact, several cloud-based options can help you to transition from paper to digital.
Additionally, a digital expense tracker can help to save valuable time when it comes to getting ready for the tax season. You should look for trackers that can categorize expenses. By going this, you’ll be able to craft a detailed report of business expenses, separated by categories for the entire year. Modern-day trackers also come with powerful features such as auto-scanning, enabling you to scan a copy of a receipt and log the expenses. Meanwhile, there are several trackers on the market that can track gas mileage.
2) Establish a Tax Section
One of the easiest ways you can stay organized now is to designate a tax space in the office for the tax season later. For instance, you can find an empty drawer in an office and place all your important tax-related documents. If you’re concerned about the security of said documents, you can create a designated tax space in your home as well. The key thing to remember is that you should be consistent when placing your documents in the same place. Additionally, you should store them in an area that is memorable because if you struggle to remember where you established the tax section, it’s easy to shrug it off and put it off until a later date.
3) Business Credit Card
Many small business owners use multiple personal credit cards to take care of operating expenses. Then, when tax season approaches, they go through mountains of data for each card to isolate business-related expenses from personal expenses. Having a business credit card can make the process of tracking business expenses much easier. Additionally, using one card that was only used to cover operating expenses will help to ensure that you didn’t overlook any expense that you would have otherwise included when you file taxes.
Typical expenses that can be deducted include packaging, office supplies, and rent for office space. One good way to determine which transaction is deductible is to see what all the expenses that came into place when you made a sale are? Did you use specialized equipment or service to deliver the product? Having a business credit card can make this process much easier because it eliminates the need to go through multiple non-eligible transactions to determine which transactions were business-related.
4) Provide 1099 and W-2 Forms By Deadline
January 31st is the deadline for giving independent contractors and employees their tax forms. While it may be true that complete year-end information will not be available until the beginning of the following year, you can gather all the necessary information you’ll need for each form way before that deadline. Therefore, towards the end of the year, ensure that you check crucial information such as:
Independent Contractors
- Name
- Address
- Taxpayer identification number
- Total wages paid
- Name
- Employees
- Address
- Social security number
- Paid time off
- Number of exemptions
- Healthcare and retirement compensation
- Total wages
Being organized with your tax information will make it a less stressful time. When you have all the information you need, doing your taxes can be a breeze.