The last thing most people think of when setting up a business is doing taxes. But proper planning will make doing your taxes much easier – and keep the IRS happy! Here are 3 simple tips for keeping proper records:
1. Every time you buy something for your business, keep the receipt!
This will not only make a record much easier, but if you are ever audited (with your tax return reviewed in detail by the IRS), you can test your expenses and save money.
2. Write down all your expenses and income that occur.
As your business grows, you will have more and more activities to keep you busy. The last thing you want to do is every April 15 to organize your files for the year. Therefore, it is a good idea to record all its financial activities as they occur. The preparation of their taxes will have much less time if they are organized.
3. Learn how to save money on your taxes.
As you learn about taxes, you will find that there are many deductions (expenses that reduce their income and thus taxes) you can take that are not evident. When you use your home office, you may be able to deduce (at least in part) to make home repairs, utilities, the value of your home at the time you start your business, and much more.
The more you know about taxes, and the more organized you are in record keeping, more time and money you save at the end of each year!
What happens if you do not keep proper records?
People with small businesses are more likely to have their tax returns audited by the IRS. If you do not have a receipt, you will probably lose the deduction and owe money to the IRS.
And while an audit is not to be afraid, you should be prepared – the more organized your records, the easier it is to prove your case.
If you do not have one, get a box and some file folders in your local store (such benefits are deductible in order to maintain its revenue) and create a filing system for your business. Put all your receipts in the right folders, and place them in a safe place.
Another way to save time you are recording all transactions of your business – costs and revenues – into a spreadsheet on the computer. Maintain a column of revenue, advertising, supplies, etc. You need not be an expert. But keeping accurate, organized records will help you save time by filling out your taxes at year’s end.
And it can help you plan, to give a snapshot of your financial progress or whenever you need it.
That can be useful when you need to place advertisements, to borrow money – or a much needed and well deserved vacation!
