Preparing for the end of the business year is the best way to ensure your…
An experienced small business accountant can have your state and federal tax returns prepared quickly and accurately and also save you a significant amount of time. Making sure they have the information they need to file your small business taxes accurately and successfully is key to saving you money, so to help you start getting your resources together (and keep up with them throughout the year), we're sharing the documents and information necessary for small business tax preparation.
Organizing Your Small Business Tax Information
As a small business owner, one of the most important tasks you need to do when it comes to your taxes is organizing your financial information. Keeping your records organized can help you save time, reduce stress, and avoid costly mistakes.
Why is Organizing Financial Documents Important?
Organizing your financial information is crucial for several reasons. First, it can help you keep track of your expenses and income, which is essential for preparing your tax return accurately. Additionally, it can help you avoid penalties and fines that can result from missing deadlines or failing to report income correctly. Finally, it can help you identify areas where you can save money and optimize your business operations.
Tips for Organizing Your Small Business Documents
Organizing your financial information is crucial for small business owners who want to prepare their taxes accurately, avoid penalties, and optimize their business operations. By following these tips for keeping your financial records organized, you can save time and money when it comes time to meet with your small business accountant.
Keep Business and Personal Finances Separate
One of the most common mistakes small business owners make is mixing personal and business finances. Doing so can make it challenging to determine which expenses are tax-deductible, and it can also complicate the bookkeeping process. To avoid this, it's crucial to keep your business and personal finances separate. Open a separate bank account and credit card for your business, and use them only for business-related transactions.
Keep Receipts and Invoices in One Place
Keeping your receipts and invoices in one place can help you stay organized and save time when it comes time to prepare your taxes. Consider using a cloud-based document storage solution like Google Drive or Dropbox, where you can store all your financial documents in one place. Alternatively, you can use a physical filing system to keep hard copies of your receipts and invoices.
Consult with a Small Business Accountant
If you're not confident in your ability to organize your financial information, or if you simply don't have the time to do it yourself, consult with a small business accountant. An accountant can help you keep your records organized, prepare your tax return, and provide valuable financial advice. A good accountant can also help you identify tax deductions and credits that you might have missed otherwise.
What Documents Does My Accountant Need to File My Small Business Taxes?
As a small business owner, filing your taxes can be a complex and time-consuming task. You want to ensure that you are accurately reporting your income and expenses to avoid any penalties or fines. Your accountant can help you navigate through the tax process and ensure that your tax return is filed correctly. However, to do so, they need specific information from you.
Let’s look at what documents your accountant needs to file your small business taxes accurately.
Whether you have a sole proprietorship, limited liability corporation, or s-corporation, your business taxes pass through to your personal taxes, so it's important to have correct personal identification information as well as business information so your return doesn't get sent back. You'll need a form of identification, such as a driver's license, as well as your social security number and the social security numbers of any dependents.
Last Year's Tax Return
Your tax return from last year provides an accountant with a good foundation for where to start preparing your new return. Not only will they be able to see much of the personal and business information they'll need, like the employer identification number (EIN), they'll see which deductions you've been using in the past and what you may be missing out on.
Your accountant will need basic financial statements, including:
- Income statement: Also known as a profit and loss statement, an income statement shows how much profit (or loss) your business experienced over the year as well as a more detailed look at expenses and incoming revenue.
- Balance sheet: A balance sheet calculates your assets and liabilities as well as calculating your business's net worth.
- Cash flow statement: Cash flow statements provide a detailed look at the transactions that directly affect cash that is flowing in and out of your business.
While your financial statements provide an overview of important information, your accountant will also need more detail in order to ensure accuracy and to take full advantage of any small business tax deductions you may be eligible for.
Be sure to provide the following:
- Loan information: If you took out a loan in the past year, bring the agreement with you, and bring any payment or interest records.
- Asset information: Bring in receipts for any assets, like equipment, property, or goods you've bought or sold over the year.
- Income and expense information: Your accountant needs to verify the income amount, so sales invoices, bank statements, and receipts for payments will be necessary.
- Deductible information: Health insurance, IRA contributions, home office, mortgage interest, travel, and charitable giving can all be deducted from your business taxes. Make sure you provide your tax preparer with full information for these to reduce your tax payments.
- Estimated tax records: If you've paid quarterly taxes, be sure to provide records of what you've already paid during the year.
Wage and Payroll Information
Your employees should receive a W-2 wage and tax statement by January 31, and any independent contractors or freelancers you hire should have a Form 1099-MISC of their income. Make sure you not only provide your employees with wage information, be sure to provide records to your accountant, too.
Schedule a Consultation with our Small Business CPA in Raleigh Today
We understand that maintaining records and documentation throughout the year can be challenging. Our small business accounting firm offers comprehensive small business monthly bookkeeping services, financial statement preparation, and tax preparation services to help you save time and improve accuracy so your small business can continue to thrive financially.
Schedule a consultation with C.E. Thorn, CPA, PLLC, a Raleigh CPA firm, by calling our firm today at 919-420-0092.
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