Tax Season Organization

If your receipts are in a shoe box don't feel alone- I've had clients come in running multi-million dollar businesses with their records literally in a shoe box. It is much easier though, if throughout the year you keep detailed records, better yet use Quicken or Quickbooks if you really want to get fancy. But rest assured that even if you don't you can still get through it. No matter where you are in the organization process here are some tips that should help make tax time go a little bit smoother:

Tips for organizing your tax information:

Sorting through the chaos...

The first thing you need to do is sorting. Take some large envelopes and label each one with the categories you will be using, we have success checklists here that can help you get ideas of what categories to use. Sort all your receipts into the categorized envelopes and then tally the amounts up, preferably with a printing calculator to save the printed calculations, and write the total on the envelope. Then it's a good policy to add the receipts up a second time and double check your number you wrote on the envelope.

Verifying Tax Forms

Next make sure you have received all the tax forms you should get- if you have worked multiple jobs did you get a w-2 or 1099 for each one? Did you move during the year and possibly not update your address with an employer or bank? Make sure you've opened all your mail and that you have kept an eye out for corrected forms. If you do get two forms from one company check to see if one of them is a "corrected" form, if not check to see if the account numbers are different. If in doubt call the company that issued you the tax form- whatever they sent you they also sent the IRS so you have to report those numbers exactly on your return and if the company screwed up (it happens a lot) then getting them to fix it now is a lot easier than getting it resolved once the IRS sends you an audit letter.

Compile Tax Questions

Make up a list of questions for your tax adviser or to research answers for if you are self preparing. Put together any articles you have printed of tax law changes you have questions about, and think about if anything has changed in the last year or will change this year that you need to talk about the tax implications of. Changing jobs, unemployment, self-employment, buying or selling a house, foreclosure, debt issues, investment decisions, all good things to ask about when working with your accountant. If you aren't taking advantage of asking questions to a professional you are missing out on half the benefit of hiring someone.

Keep Separate Bank Accounts

Although it doesn't help much now when you need to get organized, one way you can help yourself in the future is to open separate accounts for business activities now. Depending how complicated your business is will be how many accounts you need. For example, if you have a couple rental houses you can open separate accounts for each rental house to split up the income and expenses more clearly for each. Makes tax time so much easier when you don't have to sort through all your personal expenses.

Look for Forgotten Expenses

It is easy to forget business expenses come tax time. It is good to look around your house and try to spot possible deductions. Did you buy a new computer or desk for your office perhaps? Also now is a good time to clean out your car to look for receipts that may have fallen under the seat or in the door, plus vehicle receipts are often kept in the glove box.

Think About the Future

Has your business been as successful as you hoped? More successful and you are overwhelmed? Now is the time to start thinking about if a different entity structure is worth considering to have tax savings in future years. Or if you are planning on selling your business or selling a piece of real estate you own, now is the time to set yourself up for future savings.

For more small business tax information please read THE SMALL BUSINESS TAX GUIDE available on in printed and Kindle formats.

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