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Income tax season is here! Some people and business owners find this time of the year to be stressful while others sail right by. Those that find it stressful wait until the last minute to coordinate their bookkeeping and filing.
Business owners and entrepreneurs outsource bookkeeping or employ an in house bookkeeper to keep their finances and paperwork in order all year. Here are my tips to help you to prepare for income tax season so you can achieve a smooth season year after year.
Keep your bookkeeping up to date. Whether you are an individual or a company, be sure to keep your checkbook or software up to date. Don’t wait until the last minute to create a whole year of bookkeeping.
Catch up work is costly and time consuming. By keeping your finances up to date, you can budget, spend within your means, and forecast upcoming expenses or purchases. Hiring a bookkeeper allows you free time for your business and your family.
File all pertinent information digitally or manually. End of the year taxes means looking for specific documents and totals. When you create a file system that works, gathering the data you need during income tax season becomes so much easier.
I use a file system and software so when I give my tax adviser end-of-year totals; I know he has everything he needs.
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Tax Adviser or CPA
Meet with your tax adviser or CPA a few times a year. Most companies coordinate a review of their books multiple times a year. The review of your books throughout the year helps to plan for tax payments, tax implications, and any other relevant information.
In addition, sometimes the bookkeeper has questions on how to categorize a transaction for record keeping. The tax adviser or CPA can contribute to the success of the individual or company.
Ask your tax adviser or CPA questions. By asking questions all year you can determine if life events may affect your tax payments or refunds. Some examples are selling a home, having a child, leaving a job, purchasing equipment, and much more.
I have worked with multiple tax advisers and CPA’s for clients and myself. If you are working with a good tax adviser or CPA, they will want to make their life as easy as yours. They will answer questions to assist the end-of-year process.
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A System for You
Use a manual or software system that works for you. Whether you own a company or managing individual finances, be sure to use a bookkeeping and reconciling system that works for you. If you are taking care of your own bookkeeping or someone else is managing it, be sure to have access when you need it.
Cloud accounting programs allow you to work while your bookkeeper does. I am fond of QuickBooks Online, but there are many other software programs like FreshBooks and Xero that are affordable and easy to use.