No one enjoys tax time, not even accountants. Because business owners don’t enjoy taxes, they tend to avoid the issue, procrastinate, and then make a last-minute dash to the filing finish line. You can alleviate the stress of scrambling to meet tax deadlines by preparing throughout the year. So, this year, make it your resolution to get your taxes organized and ready for tax season.
Here are eight resolutions to get your taxes on track all year.
Resolution #1: Make Your Tax Preparer’s Life Easier
At tax time, your tax preparer is your best friend. He or she is going to take a year’s worth of income statements, expense reports, deduction lists, receipts–and so much more–and make sense of it all, and then file it accurately so your business complies with all the necessary IRS requirements. The more you can do to make your tax preparer’s life easier, the better job they’ll be able to do for you and your business. And, if you’re paying your tax preparer by the hour, bringing them an organized set of documents to file will bring your costs down, too.
Resolution #2: Stop Storing Receipts in Shoeboxes
Streamlining your business practices has a lot to do with helping you remain organized all year long. Eliminating as much paper from the process as possible is one of the best ways to do this. The IRS accepts digital copies of receipts, so there’s no longer a reason to hold onto paper. There are several cloud-based tools out there to help you make the leap and leave paper behind.
Using a digital expense tracker will save you time when preparing your taxes. Look for tools that categorize expenses so all you have to do is run a report to get a detailed record of your expenses for the year.
Most expense trackers include features like auto-scanning which allows you to simply take a photo of each receipt to log the expense. You can use tools such as Zoho, FreshBooks, and BizXpenseTracker to scan, categorize and organize expense receipts like meals and entertainment, business supply purchases, and mileage. There are also mileage-only apps like TripLog and MileIQ that will track your mileage with GPS.
They each have their strengths so do your research and know your specific needs before you buy.
Resolution #3: Organize Your Paper Records
Even if you use cloud-based accounting software and keep most of your business records digitally, it’s hard to go completely paperless, especially original copies of important documents like signed contracts and other agreements. Start by keeping the number of hard copies you store to a minimum, and organize paper documents in a portable file box. This will help you keep only what you need. Bring these paper documents to your accountant’s office when you meet at tax time.
Resolution #4: Issue W-2 and 1099 Forms by the Deadline
The deadline to deliver tax forms to your employees and independent contractors is January 31. Complete year-end information isn’t available until the first of the year, but you can begin to gather the information you’ll need to complete each form beforehand.
Towards the end of the year, you’ll want to verify basic, key information with each member of your staff.
For employees, verify:
- Social Security Number
- Paid Time Off
- Number of Exemptions
- Total Wages
- Healthcare and Retirement Contributions
For independent contractors, verify:
- Taxpayer Identification Number
- Total Wages Paid
You’ll need this information to prepare each W-2 and 1099 form, so having it ready to go on January 1 will make it easy to meet the deadline at the end of the month.
Resolution #5: Take All of the Deductions Your Business is Eligible For
If you’re not taking advantage of every deduction your business is eligible for, you’re likely leaving money on the table. Most business-related expenses – like office supplies, employee meals, mileage, and loan interest – are fair game when claiming deductions at the end of the year. Even many start-up expenses are deductible.
The IRS considers a business expense deductible if the expense is both ‘ordinary and necessary’. In 2018, the IRS revised the Tax Cuts and Jobs Act and redefined which expenses qualify for a deduction. This is an area where you need to do your homework and learn what you can and can’t claim. Determine what you can deduct and make sure you’re keeping good records throughout the year so you can claim expenses and owe less come April.
Resolution #6: Use a Business Credit Card for Expenses
Tax preparedness is about getting organized and automating as much of the process as possible. The less manual legwork, the more time you’ll have to spend generating revenue for your business. One of the best ways to organize your business expenses is to use a business credit card.
Most business credit cards automatically organize your purchases into different categories, making them easier to track. And, you have the added backup record of your credit card statement each month should you need to provide the IRS with documentation of the expenses you’re claiming. Paying business expenses with a credit card is also a smart way to build your business’ credit. Don’t let this resolution backfire, though. Always pay your balance off in full each month.
Resolution #7: File by the Deadline
This is one of the big ones! Filing on or before the April tax deadline is critical, especially if you have estimated quarterly payments to submit. Missing deadlines and filing late will quickly attract the attention of the IRS and increase your chances of an audit.
The IRS website lists tax filing deadlines and will send you reminders about upcoming due dates that apply to your business. Create deadlines for yourself so you gather the necessary information needed to file by the due date. And, if you are going to file late, work with your accountant and file an extension on time.
Resolution #8: Spend Time on Taxes Every Week
Just as you can’t expect to stay in shape if you only exercise once a year, you can’t expect to stay on top of your taxes if you only make them a priority during tax season. Start the new year off strong and schedule tax preparation time each week. Taking just thirty minutes at the end of the week to reconcile your books, electronically file your receipts, plan for quarterly payments, and more will get you organized and ready for next year’s tax time.
Getting your business taxes organized is easier with guidance from someone who’s done it themselves many times before. By working with a SCORE mentor, you’ll have the support of an experienced professional who can guide you through the tax preparation process and help you be prepared for tax season. Contact a SCORE mentor today.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.