Tax Planning
Tax season giving you butterflies every year? Make things easier for yourself by grabbing some essential tools for tax preparedness.
The better you prepare, the easier tax season will be for your business. Putting together accurate tax returns isn’t as tricky as some business owners think. It’s just a matter of handling the prep work with care and leveraging the best tools at the right time.
Here are some of the must-have tools you need for your business.
Filing taxes and communicating with accountants and bookkeepers mostly happens online nowadays. However, companies must still deal with plenty of physical documents.
Sharing documents online can be tricky if you don’t have a way to digitize physical copies.
This makes a document scanner a critical tool for tax preparedness. It can help you scan receipts, invoices, and other essential financial documents.
Receipts, in particular, are notoriously easy to lose. But they can be vital during an audit if you’re asked to back up deductible expenses. Having digitized copies is a great way to be prepared and protect yourself against fines.
In addition, having access to a scanner means you won’t have to worry about lots of paper. Organizing documents on a computer allows you to save money on storage space and free up time you’d typically spend on physical organization.
Even better, document scanners come in many forms these days, so that you can opt for a wide range of portable and fixed devices and even apps. You could even get an all-in-one solution that includes a printer.
You get peace of mind, and your accountant and bookkeeper will have easy access to all the information they need to handle your company’s financial situation.
Digitizing documents is useless without a place to store them. Some accounting software can help, but it’s always good to have backups.
Remember that your business may need to keep certain financial records for several years before being able to dispose of them. Therefore, digital and cloud storage is among the top essential tools for tax preparedness.
First, a lot can go wrong with an office computer. While it’s convenient to store tax documents and financial reports on its hard drive for easy access, backup files are critical.
Investing in portable SSDs, USB drives, and cloud storage solutions is always good.
You can keep original document copies in various locations, locked away from prying eyes. If something happens to your office, personal computer, or your bookkeeper’s data, you’ll have contingencies. That way, nothing will fluster you once tax season arrives.
Again, this is the type of tool that comes in many shapes, sizes, and price points. There’s no shortage of offers on the market to fit your unique requirements in terms of durability, security, and ease of access.
There are a couple of reasons why you need reliable expense-tracking software.
First, your tax return will be more accurate if you monitor and log your expenses precisely. In the event of an audit, your tax preparedness software will give you substantial protection and peace of mind.
Second, making financial predictions and understanding costs comes down to knowing how the money moves in your company.
You need to clarify your spending to make financial decisions and prepare solid tax documents.
Lastly, managing expenses is key to putting your tax documentation together but can be very time-consuming. The last thing you want to do is sort through expenses at the last minute to figure out what you can or can’t deduct.
You can also avoid mixing up business and personal expenses by using expense-tracking software.
If you’re not keeping an eye on your expenses, you can complicate your accountant and bookkeeper’s jobs. They might have financial expertise but still need good, accurate data to perform their tasks.
You can get various paid or free-to-use apps that will enable you to input and monitor expenses. In addition, you’ll be able to generate accurate historical reports that will be crucial during tax season.
As a side note, it’s best to use tracking software that works with your bookkeeper’s accounting software of choice. This will make sharing information much more manageable.
And while Excel can be a good choice, don’t be afraid to explore other options that offer more automation features. Another thing worth noting is that multi-device compatibility can also be convenient. If you’re always on the move, using your smartphone or tablet to access an expense tracker might be beneficial.
Here’s a tool you might not consider vital. While digital documents are easy to delete, physical copies are tougher to handle.
You should, of course, save, categorize, and share relevant paper documents with whoever handles your taxes. That much is clear.
But, the law might only require you to hold on to them for three, seven, or ten years. What happens to those documents after you no longer need them?
Since you can’t keep renting storage space indefinitely, you must properly dispose of them. However, throwing away documents containing vital financial information is a bad idea.
A document shredder will render your paperwork unreadable and keep people from stealing your information.
You can also use a shredder to deal with clutter. Many receipts, memos, statements, and other documents can come across your desk in any given year. That doesn’t mean all of them are important or matter to your tax preparedness.
Once you’re done filtering the valuable documents from the unimportant ones, you can safely deal with the latter. Shredding them will declutter your financial paperwork and keep them safe from prying eyes.
Many business owners tend to underestimate the gravity and complexity of their tax season responsibilities.
Different business structures, state legislations, industries, and other factors will determine the scope of your company’s tax season responsibilities. You might find that there’s more to do than just filing a basic W-2 form or a Form 940.
Tax software streamlines and automates many tasks involving your financial recordkeeping. You can get guidance on what statements you need, how to make specific calculations, and more.
Unlike humans, the software leaves little room for error (provided you input the correct information). Tax software can generate accurate reports and inform you of potential credits and deductions. It can help you save money and increase your business’s profitability.
You’ll also save many hours of work if you don’t have to sort through a mix of digital and physical financial records when preparing tax documents.
However, just because tax software can be helpful doesn’t mean it's the ultimate tool. Although it can simplify things for you, you’ll still need an expert’s touch to maximize tax deductions, eliminate audit vulnerabilities, and increase your bottom line.
That’s why the following tool is an absolute must.
Unless you’ve handled other people’s taxes successfully, you have much to learn about how to do it for your company.
But even if you could put in the time to learn everything you need to do an excellent job, is it worth it?
As a business owner, you have many jobs and responsibilities. However, those jobs may rarely include bookkeeping and accounting obligations. These can be complex — depending on your business structure — and time-consuming.
Business owners need to focus on the business’s operations instead of working on all the day-to-day matters of the company, like trying to handle taxes personally.
Of course, you’ll want to gain more knowledge of your finances and understand the numbers on your statements.
So, how do you learn?
You can start by leveraging one essential tool for tax preparedness — a third-party accountant or bookkeeping service.
Your company has a lot to gain or lose based on how you approach tax season. The last thing a growing business needs is someone with limited knowledge in this space.
Sure, working with tax software might help you understand some fundamentals. But that’s not enough if you have ambitious financial goals.
Remember that the government can take up to 40% of your taxable income, depending on your state and industry. However, tax laws have plenty of workarounds. You need someone familiar with them to lower the amount you might have to pay.
This is where a third-party accountant or bookkeeping service comes in handy.
Someone with ample knowledge of your industry and its tax regulations will know how to work the system in your favor legally. This can mean:
These are just some things you can get done by hiring a bookkeeping service like Swyft Books.
Tackling these tasks yourself won’t just eat away at your limited time but might also be beyond your area of expertise.
With a dedicated and knowledgeable accountant, your tax preparedness will be on-point throughout the year.
And keep in mind some of the other benefits of having this kind of tool at your disposal. Every financial decision will yield a result reflecting your business goals. Accountants and bookkeepers can also make good business advisors and highlight opportunities and risks.
Therefore, you won’t just be better prepared for tax season. You’ll gain more confidence in your decision-making process and be more likely to lead your company towards a profitable future.
Tax season can almost feel suffocating to many small business owners. But there’s always a way to clear the air. As difficult as the tax code might seem, there are methods to work within the system and come out on top without doing something that will draw unwanted attention from the IRS.
In terms of tax preparedness, you’ll have two things to do.
First, ensure your company has the proper tools and systems to keep track of vital financial documents.
Secondly, don’t try to untangle the mess yourself. A third-party accounting and bookkeeping service can do it faster, better, and cheaper.
If you’re interested in using a tool that will protect you against audits and set up your company for financial success, reach out and find out how Swyft Books can help.