There’s a reason why nobody likes tax day. When you consider the stress, piles of paperwork and inevitable headaches that come with it, the conclusion is it’s usually a day best left forgotten. And God help you if you happen to mislay a few receipts or crucial zeros that’ll set the accounts straight.
Quite unsurprisingly, the American Psychological Association (APA) also agrees that “enjoyable” and “tax day” are not words that often go together. They report that stress related to filing taxes and tax deadlines can increase unhealthy behavior, such as poor diet choices, smoking, drinking and being inactive.
You see, the truth is that filing taxes is often a burden grudgingly endured by many entrepreneurs and business owners. But it doesn’t have to be so. Tax day can be stress free and (dare we say it?) enjoying.
Here at Books by Schmidt, what we do is make tax day enjoyable and in this article, we’ll help you learn exactly what you need to do the same. Here’s everything you need for a successful tax day.
#1: Square up your general business information
Preparing for tax day sure requires you to compile all the available basic information about your business. Asides your business name (which must necessarily be there), you should also get ready your:
- EIN or social security number
- Business address
- Business start date
- Business assets
- Accounting method of preference (cash or accrual)
#2: Receipt management
It goes without saying that bookkeeping is vital to taxation. And the cornerstone of your bookkeeping will be an efficient system of receipt management. Essentially, you should imbibe the practice of organizing, filing and profiting through keeping accurate and complete track of receipts. For effective receipt management, you have to pay attention to:
Your ‘income’ is what matters most to the IRS. Whether you file personal, corporate or just informational returns is secondary.
If you sell goods, information on the cost of goods sold would also be relevant. This should cover your inventory at the beginning and end of the tax year. It also includes the cost of labor, inventory, materials and supplies purchased in the year.
In calculating income for your business, you would need to gather the following information:
- Gross receipts
- Sales records
- Any sales returns (refunds) or allowances (discounts)
- Any interest from checking or savings accounts
- Any dividends
- Any capital gains
- Any other income
Records of expenses
The amount of tax you’re liable to pay can be substantially reduced if you take note of your deductible expenses. For businesses, common deductions include insurance, mileage, rent, utilities, travel, advertising, office supplies, employee wages, taxes, and legal fees.
Other important documents and information
Efficient bookkeeping for your business also requires that you keep records of other useful documents. These documents include:
- Last year’s business tax return
- Any IRS tax statements you receive in the mail
- Copies of any other tax-related documents you’ve sent or received (such as 1099s)
- Any profits and loss statements, balance sheets, payroll documents, or other general accounting documents for your business.
#3: Make use of QuickBooks online
There are still a number of businesses that make use of manual record keeping. If you’re in this category, you should know that it’s not only going out of fashion, it is also a very strenuous process. Proper record keeping should be electronic. This is why most business owners – even the ones categorized as ‘small’ businesses – now make use of electronic programs like QuickBooks.
QuickBooks is an accounting software program that businesses use to manage income and expenses and keep track of the financial status of their business. It is most ideal for small or medium-sized businesses that do not have complicated invoicing requirements.
The most common QuickBooks solution is QuickBooks Online. QuickBooks Online is a cloud-based product that does not require installation. With QuickBooks Online, you can access your data from any computer with an internet connection using your secure login. Importantly, you can use it to invoice customers, pay bills, generate reports, and prepare for taxes.
QuickBooks Online can also be used to generate month and year-end financial reports, as well as prepare for quarterly or annual business taxes. Available in multiple subscription levels depending on your business needs, it is important that you pick the right one for your needs.
A common practice for business owners, however, is to have an in-house or outsourced bookkeeper that can help with managing the application and their business records.
#4: Hire a bookkeeper
Unless you’re a bookkeeper yourself, it makes no sense trying to do the work of one. Running your business, keeping all the records straight and still being ready for tax day can be incredibly stressful.
Tax season can be a very stressful and dreadful time for many small business owners. This is why, according to the Internal Revenue Service (IRS), more than 80 million taxpayers use paid professionals to complete and submit their tax returns. Quite simply, with a bookkeeper involved, you have no reason to break a sweat.
As a business owner, you should be doing what you love doing – being a business owner. Dedicate your time to running your business and making profits and hire a bookkeeper to keep your books in shape. To take advantage of our skill and experience at BooksbySchmidt, call (850)-685-0633 or contact us here and let us help you.
Operating out of Destin, Florida, Books by Schmidt provides more than a decade of experience in the business and accounting industry. We can provide everything you need, from basic bookkeeping services to full-service accounting. Get in touch today to get started.