Tax time may have been delayed this year due to Covid-19, but it is still less than 30 days away even with the 2020 extended deadline.
Don’t get caught sliding the receipt shoebox across the desk last minute with all the problems that can come with that. This checklist is for you to make sure that you are confident and ready:
Separate those personal and business expenses ASAP
Using business funds freely for personal needs can be a major liability for taxes and otherwise because you are not treating it as a separate entity. On the flip side, if you are casually buying a new tool for a job or picking up a chair for your office on your personal debit card, you likely won’t have that expense accounted for.
Digitally organize all your transactions into a neat source.
How does something not get missed, lost, or confused? It is organized into an accounting software system with everything easy to read, find, and see for your tax preparer. You can add digital copies of receipts and other documents as well into these transactions as a streamlined storage system. Everything clearly defined and laid out will mean better results.
Reconcile every bank or credit card account for the year.
Comparing your transactions entered with the statements is the BEST way to catch errors or missing transactions like that receipt you put in your pocket and forgot all about it. Bank feeds in software can definitely help, but either way, the software takes all the calculating out of your human hands and makes it easier to find errors.
Categorize correctly and verify transaction categories.
Common mistakes are incorrectly categorizing transactions in your financial tracking. If you move money from one bank account to another or even pay off the credit card, you must use these as transfers so that you aren’t accidentally counting income or expenses more than once. Doubling the income is costly, doubling the expenses can get you in audit trouble. Make sure owner draws are counting as that, not expenses also. This is something many, many business owners struggle with an often seek help with.
Seek help if you need it, before doing the taxes.
Getting help doesn't cost nearly what mistakes can cost. I highly recommend having separate people handle your taxes and books because you want 2 different perspectives, one from a tax focus and one focused on a finite detail monthly bottom line. Upkeep, LLC has many affordable options and ways to get you the help you need, do not hesitate to reach out. www.upkeepbusiness.com
Tax time shouldn’t be stress you out or be a worry on your mind, you can be gradually preparing for it all year long. I also want to encourage you greatly to not be solely focused on the final tax result or have someone only look at this once a year. There is so much of your information for decisions and guidance you are missing if you are only “tax-focused”. Call Upkeep, LLC today if you need help and want to get a more detailed focus on your finances.