Handling your Bookkeeping and Taxes as an Entrepreneur
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Bookkeeping is one of the most important tasks for your business, but it’s also one of the most complicated. With a few simple steps, though, you can simplify the process, creating a seamless process monthly and at tax time.
No one likes dreading tax time or spending hours searching for the necessary documents. So here’s how to make the most of your bookkeeping processes to run a successful business.
Get your Bookkeeping Records Under Control
First, it’s impossible to stay organized and stress-free at tax time if you don’t have a usable bookkeeping system.
Find a method that you find enjoyable because you’re more likely to use it. If you use a complicated system or one you don’t understand, you won’t use it, and you’re back at square one.
Here are a few simple tips to get your bookkeeping records under control.
Open and Use One Bank Account
Keep your business and personal accounts separate and only have one business account. Trying to keep track of multiple accounts can be a nightmare at tax time. Keep it simple and run everything through one account.
If you want a savings account too, open a savings account and use it for special purposes, such as saving your tax money.
Keep Track of your Receipts
You’ll need your receipts for up to three years, so finding a record-keeping system that works for you is essential. Shoving receipts in a shoebox isn’t ideal, though.
Instead, consider an electronic method, whether you scan or take pictures of your receipts and store them in a safe place. Whether you keep paper or electronic copies, create folders for each year to have the receipts needed to do your taxes.
Choose an Accounting Program
You can create a spreadsheet and manually track your income and expenses, but if you have more than a few monthly transactions, consider automating it. Systems operating in the cloud pull information from your bank and credit card statements and update them in real-time on all devices.
Balance your Books Monthly
Give yourself an hour or two every month and reconcile your books. You’ll be glad you did at tax time because it will save time and stress. Also, if you find something that’s off, you can correct it now while everything’s fresh in your mind rather than at tax time when you can’t remember what happened and which information is correct.
Maximizing Tax Refunds
Staying organized is just half the battle. Next, you should know how to maximize your tax refunds or take the maximum tax deductions available.
The most commonly forgotten deductions for business owners are the home office deduction, auto expense deduction, and the deduction for using your cell phone (for business).
To maximize your tax refunds, have the following documents ready.
- Profit & Loss
- Proof of all assets you bought and sold
- Mileage for your auto or actual expenses if you prefer to itemize
- Information for the portion of your home meant for business use
- All receipts
Having this information handy will help you maximize your deductions and lower your tax liabilities.
If you have any questions about filing your taxes, how to set up a good bookkeeping system, or any other accounting questions, contact us today!