I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.
There are many people who run small businesses. These businesses can be on the side of what they are already doing at a regular job, or they can be their main source of income. Regardless of the size of your small business, it is very important that you make sure you are keeping good records for tax season. Here are some things that you should know.
1. Keep Track Of All Expenses
There is a good chance that your business is bringing in a lot of money each month. But just because you are bringing in revenue doesn't mean that you are keeping all of that as profit. This money is simply revenue and it goes to paying your many expenses. This is why it is important that you keep really close track of all of your expenses. This isn't just because it will help you know how much profit you really made, but it will help you to determine what deductions you get. Deductions are really important when it comes to tax season. This is because these deductions will lower how much your business owes in taxes.
You should make sure that these deductions are able to be proved. You should have receipts or bank statements that show these expenses so that if you are audited you can show it all.
2. Determine When You Will Recognize Income
There are a couple of different ways that you can recognize your income. For instance, you might have someone pay you $500 for a job in advance. It then takes you three months to complete the job. So the question is will you take the $500 as income in April when they paid it? Or will recognize the $500 of income in September when the job was earned and completed? In most cases it doesn't matter when you choose to recognize it, as long as you are consistent. Otherwise you can get in trouble counting income twice and getting all your numbers wrong.
3. Start Tax Preparation Early
As soon as the year ends, start to get your tax information together. There are strict deadlines for businesses to file taxes, which is why it is so important that you start early. The easiest way to do this is to hire a certified tax preparer to help you with the process. They will get it done quickly, and you can be confident that it was done correctly.
These are just a couple of things you need to know about taxes and your small business. For more information, talk to a company such as Hough & Co CPA.
Share16 January 2018
