Enduring Tax Season

Enduring Tax Season

Tax season is like the shadow in the alley or the monster under the bed.  You know it is there, but you’re afraid to look and see what it actually is.  Most people are intimidated by taxes, they are certain that they are complicated, and because of this fear, they don’t learn everything they can about taxes.  What you don’t know can really hurt you.  Taxes don’t have to be frightening, they just need to be a combination of being organized (or as close to it as you can get) and a little record keeping.  Many small businesses elect to have a tax professional do their taxes because they don’t know what they are doing.  We are all very uncomfortable with the idea of making a mistake and I like the reassurance of knowing that someone I trust to do a good job is working on my taxes. But the question for me, like most small businesses, is what do I need to bring my tax pro to make sure that they have all the information they need to do the job accurately?

It is time to prepare

Think of tax season as you would think of running a marathon.  You don’t start sprinting, you keep a calm and steady pace to reserve your energy for as long as possible, then sprint at the end.  When we are here in January, it is time to sprint.  Here are some of the things you’ll want to hand over to your tax pro to ensure accurate reporting.  Remember, they can only work with what you give them.

Income Statement – This means any earnings that you had, bring the records for them.  Your bank account, your PayPal ledger, any online software you used to invoice that kept record of incoming funds, any checks you cashed, all of it.  It is your responsibility to know what you made, and this is the whole foundation of what you’re going to need in order to file your taxes properly.  After all, it is an income tax. Not going to do you much good if you don’t know what you made, is it?

Receipts and records of expenses – The beauty of being a business owner is that you can write off business expenses.  All of that beautiful stuff comes with a caveat: you have to be able to show what you spent, usually in the form of a receipt.  For expenses under $75, you don’t HAVE to show a receipt, but you need to explain what the expense was and when it occurred.  This is when you need to put your record keeping hat on. It doesn’t matter what method you use, but use one, whether it is snapping a picture of your receipt and putting it in a special file on your phone, or the old school shoebox.  You need to be able to show what you spent your money on if you are writing it off as a business expense.

Assets – If you acquired any assets for the business that have appreciated or depreciated in value, you need to report that as well. Those expenses are deductible and anything that is deductible is your friend. Keep these records and turn them over to your tax professional along with everything else.

Payroll reports – If you have hired anyone, it is time for you to break out your payroll report! What have you been paying them, and how?  Bring along the appropriate tax documents, such as w-2s or 1099s so you can have your records accurately reflected.

Home office – Do you have a home office? Did you know that you can write off a portion of your rent or mortgage if you do?  The IRS allows this, but it also pays close attention to what you are reporting.  Bring the pertinent information, such as the square footage and the amounts you pay to the accountant so they can determine if this is a good deduction for you to claim.

Inventory reports – Does your business sell items or goods? You need to bring a report with the number of items and the value of each.

Loan documentation – Do you have a business loan? That goes on your list of liabilities which can offset the assets your business has.

EIN, and your filing status – Are you incorporated? Are you an LLC? Are you a Sole Proprietor? All of those filing statuses have different requirements and different documents. Know what your filing status is in order to get your taxes filed correctly.

Advertising – Did your business run any ads this year? This is one of the expenses you need to include that can be easy to forget.  Don’t forget to include whatever you spent from your advertising budget in your expense reports.

Travel – Travel is an expense, but we need to talk about it separately because there is a lot involved in travel expenses.  Are you ready to make the most of your travel deductions? Here’s what you need to have receipts for:

  • Did you drive or fly? You’ll need to have mileage report or receipts of your expenses.
  • Lodging – Where did you stay? That is an expense that needs to be recorded.
  • Uber/Lyft/Taxi – Did you drive around the city or pay a service to take you?  Keep those receipts and write it off!
  • Meals – Be certain to keep all of the receipts for your meals while you are traveling for business and you’ll have another receipt to add to the shoe box.

Gathering all of your documents may be intimidating but you are going to be able to get into practice so you can ensure your coming year that you will have no issues with filing.  Your tax professional will always be available to provide guidance on what you should be recording by way of expenses, how long you should be keeping records, and what pieces of information are going to be most useful to them. Be certain to respond in a timely fashion to help them complete your projects on time, and tax season will be a lot less stressful from now on!

As always, if you need help, click the contact link and help will be on its way

How To Manage You Finances As A Small Business Owner

How To Manage You Finances As A Small Business Owner

If you’re like most growing businesses, you are likely inexperienced or strugglingin the areas of accounting and finance.  Don’t be embarrassed, you’re not the only one.  Even if you’re accustomed to balancing a perfect budget at home, that doesn’t mean much when it comes to the dailynecessity of running a business ledger.  Let’s not even get into having to keep trackof expenses, wages, or capital. By now your head is hurting and you don’t havetime for the things you love but that’s okay.  Businesses like mine are there to help you geton your feet and maintain a sense of calm in the financial storm.  If you have no idea where to start, use theseideas as a great beginning point to begin your journey to solid business financial practices.  All of these tipsare wonderful to start with, and they will help you to build a foundation fromwhich all of your future financial decisions will be easier.

Your money and your business’ money can’t play together

Just pretend your money and your business money are oil and vinegar.  They don’t mix; at least they shouldn’t.  When you’re a busy entrepreneur it is easy tograb whatever card is handy and swipe it without paying much attention.  It is all your money, right?  Well, here’s the thing.  If you’re attempting to grow a business, the business needs to have money to grow on, right?  If you constantly use your business as a wayto supplement your personal finances, you are doing it wrong.  Why can’t you mix your business and yourpersonal expenses?  Well, from a bookkeeping standpoint, it is confusing and makes reconciliation difficult.  There are rules and laws about what can beconsidered a business expense, and it helps you with your taxes when you don’thave to spend hours sorting out what money went where and what type of expenseit was.

You need a budget

Just like you require a budget to maintain your household expenses, your business needs a budget to keep on going.  Are you advertising? You need a budget for that.  Are you planning on taking a business trip?  You need a budget for that.  Without a budget, your business will come upshort, and you will be pulling money from your personal expenses (a big no-no) in order to meet your business’s needs.  A budget doesn’t mean that you have to have abig chunk of money in place, in fact, if you are just starting out, it ishighly unlikely that you will have access to a lot of capital.

Don’t become a big spender

When we become successful in business, many times our first inclination is to takethose profits and go celebrate with them.  Just like our personal finances, you have to be certain not to spend frivolously as a business owner.  Yes, we love having some extra money to playaround with, but what good does it do us when we have a business emergency comeup?  What if you have a slow month? What if you have an opportunity come up that you need extra money to take advantage of? Look, it is good to celebrate your wins, but add those into your budget and celebrate in a controlled way.  This will keep your money growing.

Pay yourself

While you don’t want to take all the money from your business, in all likelihood youhave placed a good chunk of your own personal funds into your business.  Now it is time for you to get some of yourmoney back.  Make certain that you are budgeting every money to spend some money on yourself.  Again, this is not your license to take everypiece of profit out of your business, but it is just a good practice to payyourself first.  You’re putting yourblood, sweat, and tears into your business and your business needs to pay yousome of that back.

Be wise with your investments

Part of the problem for small business owners is that they are afraid of using their money to invest in products and services that will take them to the next level.  If that isn’t their vice, they’reinvesting in too many services because they are afraid to learn how to managesome aspects of their business alone.  Neither one of these approaches is a good one.  We need to find a way to achieve some balance.  Instead of being hot or cold with your investments, find a way to get a good balance going.  If you have the time and the skill to learn how to do something yourself, do so.  If you have something you don’t do well, or just can’t force yourself to do, have someone else do it for you so you can concentrate on the aspects of thebusiness you ARE good at.

Don’t procrastinate if you’re in trouble.

If you see there is a financial issue coming up that you can get on top of, do notwait until it becomes a disaster. It’s never good to avoid any problems we see as long as possible.  What you don’t want as a business owner is for those problems to bite you in the butt and put your business in a place that will be difficult for it to recover from.  If you have a sharp eye on your finances, you know what you are capable of and what you are not.  It is going to be important for you to be realistic about which way the wind is blowing.  Don’t be embarrassed about being in a slight financial bind. It can happen to anyone, and if you address it quickly, it is more likely to be a small problem thatwill blow over, versus a long-term issue that will hurt your business.

Being a small business owner doesn’t mean you have to morph into a financial guru overnight.  What you’re going to need is a solid budget, some wise investments, and some common sense.  Use these tips as a starting point, and definitely plan on getting the advice of a seasoned financial expert to help you with everything that you can’t figure out on your own.