July 16, 2015
Sure, tax preparation companies in Vancouver, WA will maintain records of your small business expenses, but at a cost. When it comes to properly deducting, tracking, and maintaining your business expenses, there are many simple tips you can use for proper tax preparation that you can do yourself rather than pay a company to do for you. Whether you are a new small business owner or have been running your business for years, these simple tax preparation tips will allow you to maintain records, properly track expenses, and have all necessary documentation to present to the IRS when tax season rolls around.
1. Get Automated
Why do it yourself, when there is tax preparation and accounting software like Intuit or QuickBooks to help? These programs make record keeping and tracking expenses easy, even if you have no idea how the accounting system functions. Spreadsheet templates, expense reports, and easy to use T-charts are all available for you when using these programs. Drag and drop receipts right into the expense column and you have a running system of everything you are spending for your small business operations.
2. Don’t Co-mingle Funds
One of the biggest mistakes people make when it comes to tax preparation for their small business, is to mix up personal and business receipts. In order to avoid this from happening, there are some things you can do. For starters, avoid the use of personal cash, credit cards, or checking accounts for any expense. Even if you plan on reimbursing the personal account, if you forget to mark a payment or mislabel something, it can get messy quickly. This adds complications where it isn’t needed, and is a red flag to the IRS. Rather, make sure you have separate business accounts, credit cards, and cash set aside for business use. It not only makes tax sense, but clientele will also feel far more confident dealing with a business that uses professional checks labeled with the proper business name as opposed to personal accounts.
3. Watch Your Cash
Petty cash might see like a good idea, but it can quickly create problems for a small business owner. If not properly tracked, used, and accounted for, this cash can get misused in any business setting. Only use petty cash for instances where it is 100% necessary, and create a “cash” account within your accounting software program in order to properly label these funds and payments. Keep a paper trail where possible and limit use of cash in all instances where it isn’t absolutely necessary.
4. Credit Yourself
We don’t mean pat yourself on the back for a job well done, but rather, open a line of credit for business use and expenses. Using business credit cards will streamline expense recording. Since your statement will clearly label what was paid for and how the credit card was used, you know what was paid and how it was paid. Furthermore, statements break things down quarterly, monthly, annually, and so forth, so you know when payments were made and which period of the year they fall into. Most retailers today accept credit cards, it is more professional from a business perspective, and it basically does the hard work for you by keeping track of expenses. So, why not have business credit lines set up?
5. Save Receipts
Yes, you are using accounting software, and yes, you do track every single expense. But, having a paper trail will never hurt you, especially when you get audited randomly. Jot down the purpose of the expense on the receipt, make copies, store them as a PDF file, or use other scanning equipment, to save everything to an online file or drive. This allows you to maintain that paper trail without physically having to store hundreds of pieces of paper for the year.
When it comes to tax preparation in Vancouver, WA for the small business, it doesn’t have to be that complex or difficult. In fact, there are a number of tools out there to make preparation easy, even for individuals who have little to no experience with accounting and record keeping. Consider these tips when maintaining your own records for small business use, and you will prevent yourself from running into issues when tax filing season approaches. For more tips on how to keep your business expenses separate from personal or tax preparation for businesses, limiting the chance of an IRS audit, give us a call.
We understand that everyone is concerned about Coronavirus. And we are as well, which is why we are taking precautions to keep our clients and our staff safe.
Electric Vehicles (EV) are becoming more common in our society and a couple of months ago, Congress recognized this growing area by extending a tax credit available on costs associated with the installation of an EV charging station in your home. The available credit is the smaller of 30% of the cost or $1,000 and there are specific requirements that must be met in order to qualify for the credit which include:
Thanks to Loowit Brewing Company for the beer and Purta Studios Photography for the video. We love giving away beer each year to our amazing clients as a way to say thank you for your business!