The end of the year is quickly approaching which means that tax time is just around the corner. This season can be hectic for both business owners and accountants, and you may be starting to sweat a little. Keep in mind that your business should always be tax-time ready all throughout the year to avoid stress during filing time. One way to keep your tax season smooth is to always manage your books effectively. This is never an easy task, and if you cram all the work until the last minute, this will definitely be a real pain! Closing your books helps you prepare for income tax time and allows you to get other financials to continue leading a successful business. We’re here to remind you that there are several things to consider when managing your books so that all will be in order!
- You should make sure to gather all your financials. Collate all your bank statements and financial records for the whole year. It is important that you have these reports to prepare your end-of-year books correctly and efficiently. Review all transactions and make sure it’s classified properly.
- Always categorize properly. Make sure that throughout the year, all transactions are being recorded in the correct line item. This applies for asset, liabilities, and equity accounts. It would be of great help to use accounting software to make this task a breeze. Use these categories to tie out all your balances and make sure all account on your balance sheet is correct.
- Always keep your receipts. One way to make sure that you have a copy is to digitalize all your receipts. Physical copies are prone to loss or damage so having a softcopy would be a life saver during tax season. This would also make finding supports for transactions easier.
- Don’t forget to take inventory. You should make sure that your assets are recorded in the correct amounts. Compare your current balance to the balance at the beginning of the year to make sure that there are no discrepancies.
- Understand your tax obligations. To avoid penalties and unnecessary problems with the government, be aware of your business’ tax obligations and its corresponding deadlines. Keeping note of these deadlines can help you plan accordingly throughout the year. Also, by knowing your tax obligations, you can set aside money for such taxes and avoid the stress of having to shell out a huge amount of money for tax payment.
- Always stay informed on tax law changes. Tax laws are very volatile and often change. Being informed of these changes that may affect your business to avoid tax surprises.
- Lastly, it would be better to have a professional. Tax season is an overwhelming time for business owners. There are so many guidelines and rules to adhere to. If within your means, consult a professional to help your business through this time. It may seem like an extra expense, but this would make the work faster. Having a professional in your team could avoid unnecessary costs such as penalties due to late filing and mistakes. It would also give you the time to focus on your business instead of going through every single transaction and save you from the stress that comes with tax season.
These tips are not the only things you can do for a smooth tax season but by following these tips, you can maintain well-organized books, which will make tax time less stressful and more efficient.