Whether you’re just getting started or are trying to figure out where you’re going with your small business, the following tips can help keep your head above water with safe accounting and tax filing practices.
Record keeping is the number one issue that leads to tax problems. Whether the problem is not getting enough money back or being able to take advantage of deductions, tax breaks or just failing to report correctly, the small business owner will be better off if they keep the best records possible.
What this means is keeping track of all expenses related to the business, even those that are questionable. By keeping track of the expenses, this should include a hard file with receipts and a soft file (Quicken or other accounting program) with the data entered into it. The hard files should be in category and date order. The soft file should be sorted by category, date, cost and any other variable that comes into play.
Every single payment received should be recorded. Copies of check stubs, copies of physical checks, everything related to the payment should be recorded both in hard file and soft file. Keep the documents in swift order so that if an audit is ever ordered, they are not only right on hand but should demonstrate proper book keeping procedures.
By keeping accurate records of travel expenses, office expenses, entertainment, utilities and more, you will be able to support your tax filings to the IRS. The IRS will focus on deductions and expenses when handling an audit. If you have accurate bookkeeping records and receipts, you will be able to circumvent a negative outcome to an audit by having the proof in hand and ready.
This type of record keeping should be done in all aspects of business either by an individual owner or a certified accountant. It’s also worth an investment to have a CPA review the small business records either quarterly, biannually or annually to catch mistakes or to offer suggestions about changes that may affect the types of records kept.
This information brought to you by IncParadise helping you with all your incorporation needs.