The Tax Man Cometh…
It seems that before the holiday decorations have been stored, we’re already thinking about tax returns. A little bit of organization and some planning can keep your tax bill down, and alleviate the stress of tax time.
What can you do?
Create tax folders for 2010. Mark each folder with a label indicating the type of forms and documents it will contain. For instance, my business has folders for Payroll, Bank Statements,Accounts Payable, Accounts Receivable, and Income Tax. My Income Tax folder contains miscellaneous tax documents such as Personal Property Tax receipts, end of year earnings receipts, etc. Having these prepared folders makes filing documents easy and painless throughout the year. This in turn, makes calculations easier at tax time, and in the event that the IRS audits you… all of your documents are neatly filed and easily retrievable.
Use an experienced and professional bookkeeper and accountant. Maintaining the books on the computer is a snap. There are a number of excellent software products on the market today. It’s best to allow your bookkeeper and accountant significant input in the decision-making process when you buy your accounting software. A qualified bookkeeper will balance the company checkbook at the end of each month. Balance Sheets and Profit & Loss Statements should also be printed and reviewed monthly. These documents help owners know exactly how the business is doing financially, thus making it easier to make better educated growth and development decisions.
Your bookkeepers and accountants should always be on the lookout for more tax deductions for your business, and they should be vigilant about keeping your bookkeeping methods within IRS guidelines. An in-house accounting staff is very convenient, but these staff members should have the educational and experience background required to act and offer advice that is most beneficial to your company.
Deducting Expenses When it comes to deductions, the IRS more often than not, will want every tiny detail that supports your claim that an item is truly a deductible expense. For instance, did you know (especially if you have a home office) that your phone bill must be itemized and each line item call for long distance or cell phone use must be associated specifically with a client, legitimate prospect or other recognized business expense?
Do you deduct your automobile mileage? The IRS requires a mileage log, which ideally has a beginning year odometer reading, miles per business trip with a notation as to what business activity was involved, and the year-end odometer reading. Keep receipts for all auto maintenance as well as auto insurance and fuel expenses. If you’re reimbursed for travel expenses, you may be required to report the reimbursement as income.
Check and Double-check When in doubt, always save the receipt with a notation as to the type of business activity involved. Consult with your bookkeeper monthly and your accountant at least twice a year, and always when contemplating a large investment, purchase or sale. The IRS offers free phone consultations as well as resources and educational materials. No one will care about the financial well-being of your business like you do, and no one will ask the hard questions if you don’t.
Don’t panic. Advance preparation, organization, quick notations on receipts, open dialogue with your accounting team and you’re pretty much set to go.
We all worry about the unknown, but seldom if ever does the horror we imagine ever actually come true.
