Getting a Jump on the Tax Season

As a small business owner, you have lots to do as you come closer to the end of the year. The last thing on your mind is most likely filing income taxes for your small business or corporation. After all, they’re not due for months yet. The sooner you put your mind to organizing your financial records for tax purposes, the smoother the process will be and, most likely, the more money you’ll be able to keep in your pocket when it’s all over. 

Here are some things that you can begin to organize now to get a jump on the tax season:

1) Get caught up on your bookkeeping.

Making sure that you have organized and recorded all your sales and expenses you’ve incurred year to date will help you avoid any last-minute faxing of receipts to your accountant. You can’t claim expenses for which you haven’t kept receipts.

2) Pull all your receipts for home office expenses if you qualify.

You may claim home office expenses in most cases if your home office is your main place of business or if you regularly and consistently see customers there. You will apply the percentage of your home that your home office takes up to your actual house expenses, such as heat, water, mortgage interest, and property taxes. Make sure you have copies of all those bills for the year to assist in this calculation.

3) Organize receipts for business expenses that you have paid personally.

Many small business owners end up paying for some business expenses out of their own pockets. For example, you might be at a hardware store and end up seeing the perfect storage bins for your office files. If you don’t track the business part of these receipts, you can’t claim them as business expenses.

4) Estimate your business net income to be able to do some proactive tax planning.

Having a sense of what you should pay tax on will allow you to employ some tax minimization strategies, such as investing in IRA’s. It also allows you to make sure that you set enough money aside to pay your taxes in April.

5) Have a preliminary planning meeting with your accountant.

Accountants are busy overworked people in April. Take the time now to meet with them to discuss your business and personal tax issues and book an appointment early in the upcoming year so that you’re not scrambling at the last minute to file on time. 

6) Set up an efficient filing and tracking system for next year.

If you find that you’re always digging in your pockets or purse for business receipts or searching the archaeological layers of papers on your desk for important government forms, now is the time to change that for the upcoming year. Set up a filing system either by month or by vendor, depending on what works best for your business. Set deadlines to have each month’s financial records entered into your accounting system. For example, a goal could be to have January month end completed by February 28th. 

7) Set tax strategies and goals for the new year.

Not only should you be finalizing your tax issues for this year, it’s never too early to start off on the right foot for next year. Plan your company’s net income for this year and review with your accountant the tax implications. This will be important not only for your business activities but for your personal taxes as well as your spouse’s.