No one looks forward to tax time, and it can be especially difficult for small businesses. In order to make the filing of your income tax return as painless as possible, it helps to simplify the process. One of the best ways to make tax filing easier is to keep all of your company's records organized throughout the year.
Why Does It Matter?
In order to complete your tax return properly and maximize your deductions, it is important for you to document your income and expenses throughout the year. Without this documentation, not only will you lack the information you need to file, but you won't be able to substantiate your claims in the event of an audit. Keeping this documentation organized and in a safe location will ensure that you have everything you need to file accurate taxes and minimize what you owe. When tax time arrives, PADGETT can review this documentation and use it to complete your return quickly and accurately.
What Records Do I Need?
Small businesses should keep and organize any records that pertain to their income or expenses. Some examples of records you should keep include:
- Employment tax
- Records of the purchase and/or sale of assets.
- Travel expenses.
- Entertainment and gift expenses.
- Inventory purchase receipts.
- Records of customer payments.
- Payroll records.
- Health insurance records.
- Records of business mileage driven during the year.
- Bank deposits/statements
When it comes time to file your taxes, bring all of these documents with you to your appointment.
Organizing Past Taxes
Even after your tax returns have been filed and accepted by the Internal Revenue Service, you should still keep a copy of the return, along with any documentation you used to complete it. The IRS can audit your return years after it has been filed, and you will need this documentation to substantiate the deductions and credits you claimed on the return. If you don't have this documentation, the IRS may disallow the deductions or credits in question, and you will owe more money. In some cases, you may also owe penalties and interests.
Some business owners believe that their returns will not be audited because they were completed accurately or because the business is too small. However, the IRS can audit any return, and some audits are chosen at random, so there is no way to avoid audits completely. To prevent problems with possible audits, keep all of your past returns organized in a file that includes the documentation used to prepare them. If the IRS decides to audit your return and PADGETT helped you prepare it, we will also be available to help you prepare for the audit in advance.
Do you have the support you need to manage your small business bookkeeping?
Contact us to schedule an appointment to speak with a local small business advisor.