Bookkeeping involves recording the financial effects of business transactions. The importance of maintaining books throughout the year cannot be emphasized enough. Bookkeeping helps you analyze your past, while planning for the future. Many businesses that overlook the importance of bookkeeping, realize the criticality of maintaining their financial records the hard way during the tax filing season. In the absence of proper or complete records, many businesses commit mistakes when filing taxes, and that costs them dearly. To ensure smooth sailing during the tax filing season, you must prepare well in advance. To help you save time, and avoid confusions, we provide a few bookkeeping tips to prepare for tax filing. Take a look.
1. Collect and compile all your financial records
When filing taxes, you would be required to provide proof of financial transactions. To ensure you have the relevant documents ready, organize all your financial records related to payrolls, office supplies, equipment expenses, income from different sources, charitable donations, marketing expenses, and utilities. Go through your personal credit card statement, and take note of business-related transactions, if any. To organize data, consider using tools such as spreadsheets.
2. Scan every expense closely and look for missed deductions
Before filing your return, double-check your documents such as receipts to ensure you are not missing any deductions. Keep an eye out for most commonly missed business deductions such as home office deductions, entertainment expenses, communication expenses, and self-employed health insurance. To ensure every expense is recorded accurately, tally receipts and vouchers with entries.
3. File for an extension
If you are unable to streamline your bookkeeping process before the tax filing season, consider filing for an extension. To avoid last minute confusions, do not wait till the tax day, and file your request well in advance. Filing for an extension does not mean you would not have to pay. To avoid penalties, pay the amount you believe you owe.
Follow the above-mentioned bookkeeping tips to prepare for the tax season. To automate your bookkeeping process, consider using accounting software. If you are facing problems designing and implementing your bookkeeping process, look for bookkeeping services near you. If you are in Santa Rosa, Virtual Jeannie Bookkeeping Services Inc. would be happy to help. Equipped with years of experience, our team of expert bookkeepers will come up with a custom strategy to meet your specific needs. To learn more about us, call at 707-664-1425. If you want our experts to contact you, fill out our contact form.