Tax guidelines and rules change yearly. Preparing for tax season in advance will help your firm, non-profit, or business file an accurate return. Preparing for tax seasonshould be an everyday occurrence. Avoiding the last minute rush to find the right documents will aid in a stress-free tax preparation.
3 Tips to Help You Get Ready for Tax Season
Gathering material early is the best way to prepare for the upcoming tax season. Remember more paperwork or documentation is better than too little. Keep hard copies in a file for easy access. Routinely backing up digital files in a secure manner will ensure you have all the needed information at tax time.
Other useful tips for preparing for tax season include:
1. Employee Information
Your employees’ personal information is a vital component of payroll taxes.
- Employee Records: Update your employee records on a regular basis. Ensure each employee has a current address, social security number, exemption status, and other important information on record.
- Independent Contractors: If you work with independent contractors who made over $600, you will need to file 1099 forms. Asking individual contractors to fill out W-9 forms with current information will make the process of issuing 1099’s faster.
When paying your employees, you always want to stay payroll tax compliant. Failure to follow the proper procedures may result in hefty IRS penalties and a tax audit.
Deductions are a perfect way to ease your tax burden. Consider checking your deductions periodically throughout the year. Consulting with your tax firm or accountant will help in maximizing the deductions. The accounting professional can provide you with exact details on the types of deductions for your company. If your business needs more deductions, you will have time to purchase new equipment or other assets.
Gather the proper documentation for maximizing your deductions prior to tax time. Small expenses can add up to a major impact on your taxable deductions. For example, your company’s vehicle may be subject to numerous deductions when used for business-related travel.
- Gas purchases
- Oil changes or other repairs
- Lease payments
- Parking expenses and other directly related fees.
Other deductions range from employee bonuses to advertising campaigns. Asking employees to stay proactive by keeping all forms of documentation even for the smallest purchases is critical. When in doubt, keep the receipt, invoice, or other related documents.
3. Maintain Proper Financial Records
Keeping track of your daily operations needs to be a priority throughout the year.
- Accounts receivable
- Accounts payable
- Credit card transactions
- Cash flow
- Profit and loss
- Petty cash payouts
- Checking or bank statements
Knowing your daily financial status will help you find any errors or areas that need attention prior to tax season. Do not wait until the last minute to find all the necessary documents to file your taxes. By being proactive on your financial records, you will not be scrambling around at the last minute. Discuss the importance of providing documentation for transactions with your employees.
If you are uncertain of the type of documents you need to file your taxes, discussing your concerns with a reputable tax firm, such as Ernst Wintter & Associates, should be your next step. Our accounting firm of CPAs have over 25 years of experience and are available to help your business prepare for the upcoming tax season. Schedule an appointment with us today to get a head start!