Wednesday, December 7, 2016
Tax Season is Coming--How To Prepare
Use this handy guide to get things ready this month, so that when the stroke of New Year's is here you can start and finish this onerous task quickly and efficiently. If you start now and do it a little at a time it won't be so heinous.
1. Gather your documents. Receipts, invoices, records of payments received, estimates taxes paid, mileage records, salary paid to employees, etc etc. Sort everything out into categories and put them into a spreadsheet ready to be totaled up, or enter into your bookkeeping software that you should have started using way before this (I use GoDaddy bookkeeping, it's cheap compared to the time it saves you.)
2. Investigate whether you're required to do inventory or not. There are exemptions for small businesses and certain types of businesses, so if there's an exemption that includes you, take it. You don't want to figure out inventory if you don't have to, believe me.
3. Check into whether any equipment you have on your depreciation lists has been sold or discarded this year and update those. Add anything new that you might have had to buy this year, and get the receipt copies to keep with the record of depreciated items.
4. Make sure you're up to date on your estimated tax payments. The last one for 2016 is due in January of 2017, so if you're behind you still have some time to catch up.
5. Go through your bank account and make sure there isn't anything that you paid for that you didn't put into your expenses. Sometimes things that are overlooked can be a good deduction.
6. If you have a rough idea of how much your net income is going to be, check the tax tables to see if you're going to have one of those "surprise, you made more than you thought so now you owe a ton of income tax" moments. If it looks like you're going to experience the joy of owing taxes, at least you can start putting some money aside to pay for it between now and April 15th.
7. If you haven't done it yet, so get some bookkeeping software. Like I said, I use GoDaddy bookkeeping (www.bookkeeping.godaddy.com) but any online service that you like will do. Make sure that the one you choose will import the accounts that you tell it to, and then all you have to do is go in and double check that everything was entered and press "print" and you're ready to fill out your taxes. Seriously, this saved me a week of work the first time I used it. My taxes are strange because of my online income, so using GoDaddy uncomplicated things for me tremendously. If yours aren't as tricky and you can get by with a spreadsheet that's fine, but make sure it's ready to go and completely accurate.
8. If there's any equipment or supplies that you need, and you have the need to reduce your net income by adding some expenses before the end of the year, go shopping now. Just make sure that your payments process before the end of the year to avoid questions about which year the items were purchased.
Taxes don't have to be hideously difficult, you just need to get organized to make it easier on yourself. Starting now will take the pressure off and make it easier to actually fill out the forms when the time comes.
Kara Buntin owns A Cake To Remember LLC in Richmond VA, and cake supplies online at www.acaketoremember.com and www.acaketoremember.etsy.com