If you’ve never had to prepare for tax filing time before as a business owner, it can be a little intimidating as well as a little bit scary. The consequences of not filing on time can result in a fine for your business, and the possibility of filing an inaccurate return can also cause major issues which need to be resolved satisfactorily. To avoid any of the negative consequences associated with tax filing time, here are some tips that can keep you on the right track.
Keep good records throughout the year
Itemizing on your tax return must be justified by provable documents and receipts. This means you need to accurately document travel mileage, home office usage, meals for business, charitable donations, and all allowable startup expenses. There are other deductions of course, and you should hire a tax accountant whom you can consult with about them.
Keep personal expenses separate
It’s very important to keep your personal expenses separate from business expenses, so that the IRS doesn’t disqualify some of your business expenses. The best way to do this is to maintain separate bank accounts and credit cards for each one, so there is no blurring of the lines.
Review your accounts receivable and inventory
At the end of a tax year, you should conduct a close review of receivables and write off those you consider uncollectible. In the same way, inventory should be reviewed for obsolescence, and written off. Both these measures can reduce your existing revenue balances, and therefore your tax liability as well.
Check for potential tax credits
Tax credits are like deductions in that they can reduce your potential taxes, so any credits you can legitimately claim will be well worth your while. A few of these are the energy tax credit, the work opportunity tax credit, healthcare tax credits, and the disabled access tax credit. Credits are even more valuable than deductions, so consult your tax accountant to make sure you claim every one you are entitled to.
Take notes for next year
Make a note of any difficulties you have this year during filing, and that will help you avoid the same mistakes or oversights for next year. Each year should get a little bit smoother as you do this, and eventually you’ll become a bit of a tax filing expert yourself.
For additional assistance on preparing your taxes, contact SkyBridge Capital today!