Every year, many businesses commit costly mistakes when preparing or filing their returns. Tax filing oversights can catch the attention of the IRS. Before you can figure out what went wrong, the IRS can slap a hefty penalty on your business or worse, begin an audit.
Preparation is the key to success. To avoid last-minute confusions and ensuing chaos, prepare for tax-filing season. A little preparation can save you time and money while avoiding potential headaches down the road.
Follow these tips from an accounting firm near you to get your business ready for tax season.
Claim Deductions
One way to minimize tax liability is to take advantage of all possible tax deductions. If you put off your tax preparation until the very last moment, you can miss out on deductions and exemptions.
Determine if your business is eligible for any exemptions. Before claiming a deduction, review its viability and be sure to record every deduction claimed.
Businesses can take various steps to increase the number of deductions they can claim. For instance, a business can benefit from making charitable donations, purchasing business equipment, hosting employee holiday parties, or giving employee bonuses.
Bank Reconciliation
Reconciling your bank statement involves comparing it with your bookkeeping records for the same period. The objective of a bank reconciliation is to see if there are any differences between these two sets of records.
When doing bank reconciliation, keep an eye out for discrepancies and errors. Double-check your ending balance and look for transpositions. To avoid becoming overwhelmed, reconcile in sections. Alternatively, you could partner with an accounting company near you and they will help reconcile your statements. If done correctly, a bank statement reconciliation can help catch potential fraud and cash manipulations. Reconcile your financial statements as regularly as possible to ensure they stay up-to-date.
Separate Personal and Business Records
Commingling personal and business finances will complicate your taxes. You may have to remember transactions from as far back as a year ago. You may also encounter unexpected challenges as it is extremely difficult to monitor business records when mixed with personal records.
Every business owner must have separate bank accounts, recording systems, and credit cards for personal and business finances. Use personal finances to pay for personal expenses and business finances to pay for business expenses.
A lot of work goes into preparing taxes. If you have your hands full, consider outsourcing tax preparation and filing to an accounting firm near you.
Virtual Jeannie Bookkeeping Services is a leading bookkeeping company in Santa Rosa. We use advanced tools and tried and tested techniques to help clients get their finances in order. To know more, give us a call at (707) 664-1425.