5 Tips to Be Prepared for Tax Time
It’s almost tax time. For most small business owners this can be a complete nightmare! Fortunately, it doesn’t have to be this way. In order to simplify things and make life easier for you, I want to share 5 tips to be prepared for tax time. Let's get started.
Tip # 1 Get Organized
The first thing you need to do is get organized. Get all of your receipts in one location. Organize them into monthly folders. Create a filing system that you understand and works for you. I’d recommend you buy a simple plastic portable filing cabinet ($9.97 at Wal-mart). Also, buy 12 manila folders, one for each month, and put them in your filing cabinet.
Each month put your receipts in their respective folder. At the end of the month, sort your receipts by category and update Quickbooks (or your accounting software), and print out your profit and loss statement.
Tip # 2 Educate Yourself
Consider sitting down with a CPA for an hour or two and ask any tax related questions you might have. Find out what is deductible and what isn’t. I’d also recommend that you read “Deduct It: Lower Your Small Business Taxes” by Stephen Fishman, J.D. It’s my favorite small business tax book of all time.
Buy the book and spend $100 to $200 to sit down with a CPA. Not only is it money well spent, it’s also a tax deductible business expense.
Tip # 3 Hire a Tax Professional
In some cases, it just makes sense to hire a tax professional to do your taxes for you. You can hire a competent CPA who specializes in small business to prepare your taxes for you for less than a few hundred dollars. This is money well spent. Avoid the tax preparers you find in strip malls and big discount stores. Instead, find a CPA who specializes in small business.
Tip # 4 Get a Second Opinion
If you do your tax return yourself, or have someone else do it, consider getting a second opinion. Take your finalized return to another tax preparer to have them review your Form 1040 and Schedule C and see if they can find any additional deductions you might have missed (or mistakes). You never know, you might have missed something. And if they can’t find any mistakes (or extra deductions) you will have the added peace of mind knowing that your tax return is correct.
Tip # 5 Plan Ahead
Now is the time to start planning for future tax returns. Learn from all of this year’s mistakes and plan ahead for next year. If you owed money this year, consider paying quarterly tax payments to the IRS. Ask your CPA what he/she recommends you do differently this year to minimize your tax burden.
Additionally, forecast your income and expenses for the upcoming year. If you know you will need to make major purchases, start saving money today.
Taxes are a way of life! As an entrepreneur, you must be proactive with your taxes. Make sure you develop a game-plan and system, so that doing your taxes is fun, not a hassle.
About the Author
Disclaimer: I am not an accountant or CPA. This article is for educational purposes only.
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