Keeping Proper Records
Tax time can be a stressful time for business owners and individuals alike, if they have not kept proper records of your income and expenses throughout the year.
For individuals, your income documentation will come from your employer or business in the form of a W2, K1 or 1099. You will also receive a 1099 for any investment income you have.
Deductible expenses vary from person to person and it is worth a conversation with your tax advisor to determine whether you will be filing for a standard deduction or if it is worth your while to itemize deductions. You will need substantiation for these itemized deductions. The IRS no longer requires paper copies of receipts etc and there are great apps available to assist you in keeping track of the receipts and paperwork, such as Hubdoc and Expensify so that when tax time comes it will be a breeze
For businesses, your income documentation will come from your profit and loss statement, which reflects all the invoices or sales you have made during the year. You may also receive 1099s for income depending on the type of entity you have.
Deductible expenses are the expense incurred in operation of your business and will also be found on your profit and loss statement.
Keeping proper records is crucial for the successful operation of your business. This is something that happens as a matter of course; daily, weekly or monthly depending on the size of your business. By doing this as part of your business operations, tax time is not a daunting task. It is simply a matter of printing a report.
While bookkeeping and accounting may seem like a task anyone can do, people often forget that it is a profession. It takes years of education and experience to become an expert. All business owners should consult an educated and experienced accountant or bookkeeper to help them set up their bookkeeping systems or do a health check on it regularly if you are going to be doing the bookkeeping yourself. This ensures that you are on the right track and that unexpected issues don’t raise their head at the worst time - like when you are trying to get your taxes done.
The team at Handle It would be happy to assist you or answer any questions you may have in relation to setting up your systems or advising you on the best tax structure for your particular situation.
You can contact us at firstname.lastname@example.org or 833-202-7676 Ext: 1000