Tax season can be a trying time for any business owner, but with the right preparation and organization, you can make the process much easier.
To ensure that you’re ready for tax season, there are certain documents that you should compile beforehand. Read on to learn more about the financial documents small business owners should have in order prior to tax season.
As a small business owner, the end of the tax year can be daunting. With a few months to go before the deadline, now is the ideal time to start compiling and filing your financial documents. You need to make sure that you have all of your financial documents in order and that everything is accurate. It’s important to start preparing early, so that when tax season comes around, you’re ready to go. But what financial documents should you be compiling? Let’s take a look.
Accounting Records & Bookkeeping System
Having an organized accounting system is essential for any business owner when filing taxes. An accountant or bookkeeper can help you develop an orderly ledger where all revenue and expenses are accounted for throughout the fiscal year. This should include any sales, purchases, payroll details, reimbursements, and invoices that may have been generated over the course of the past 12 months. Once all of this information has been inputted into your system, you’ll be able to calculate total income and deductions more accurately before filing with the IRS.
Bank Statements & Receipts
Make sure you have copies of all of your bank statements and receipts handy. As part of your accounting system, it’s important to keep track of bank statements from both business accounts as well as personal accounts if funds were transferred between them throughout the year. These will help demonstrate where your money is coming from, which can be very useful come tax season. This is also true for receipts from any non-cash purchases made by either you or employees on behalf of the company. These could include anything from office supplies and equipment to travel expenses incurred while conducting business outside city limits. All these items must be documented for tax purposes so make sure these records are kept up-to-date and accessible when needed.
Financial Reports
Financial reports are an essential part of managing a business and filing taxes. Financial reports like income statements and balance sheets provide an overview of your company’s financial situation. An income statement shows how much money your business made over a certain period of time (usually one month or one year). A balance sheet outlines what assets and liabilities your business has at a given point in time. Both of these documents can be useful when filing taxes because they show exactly how much money was earned or spent throughout the course of the year. This information can be used to determine if additional deductions or credits are available. Make sure you compile these before tax season begins so they are easy to reference if necessary.
Payroll Records & Employee Benefits
If you employ any staff members at your business (even just part-time employees), then you need to keep detailed payroll records on hand. This includes information such as hours worked by each employee and wages paid out—as well as any deductions taken out such as taxes or health insurance premiums—for every pay period throughout the year. You will also need to keep track of employee benefits such as vacation days taken by each worker throughout the year as well as contributions made by both employers and employees toward retirement accounts like 401(k) plans or SEP-IRAs. All of this information needs to be accurately recorded before tax season approaches.
Tax Returns & Forms
It goes without saying that you should have copies of your past tax returns as well as any forms or documents related to them on hand at this time of year. When filing your taxes, you will need to provide copies of all required forms and other financial documents associated with your business. These include a W-2 form from each employee, 1099s for any independent contractors or freelancers who worked for the company during the year, invoices and receipts related to any expenses, bank records showing deposits and payments, sales records for any products sold throughout the year, records of inventory purchased, and loan documents.
Make sure that all of these documents are organized according to date so that they are easy to find when needed. Having these ready can help speed up the process when it comes time to file taxes, especially if there are any discrepancies or irregularities that need addressing.
Tax season can be stressful for small business owners who don’t have their financial documents in order beforehand. Taking steps to prepare for tax season before it arrives is essential for small businesses looking to stay organized and save time during the filing process. Compiling bank statements & receipts, financial reports, and tax returns & forms before tax season arrives can save a lot of headaches down the line.
Make sure you speak with a qualified accountant who can provide additional guidance based on individual circumstances so there won’t be any surprises down the line. Having all this data on hand will enable you to take advantage of any potential deductions or credits while ensuring that you remain compliant with all applicable regulations in your area. As a small business owner or startup founder, it’s important that you take the time now to get organized for tax season—it’ll pay off later.