5 Tips for First-Time Filers of Business Tax Returns

As a small business owner, you have to stay on top of every aspect of your business, including taxes. It’s essential to know the ins and outs of filing your taxes for the first time, and it helps to have trusted professionals to guide you along the way.

Tip #1 - Use Good Accounting Software to Keep Track of Everything

Many small businesses trust Quickbooks or other accounting software to keep track of their income and expenses. These software programs make it easy for someone unfamiliar with bookkeeping to easily record receipts, invoices, credit card charges, and other expenses. It also provides dozens of helpful reports to show you where you stand financially at any time. Quickbooks also automates the process of reconciling your checkbook, so you know exactly how much is in your account. A program like Quickbooks takes the headaches and hard work out of your daily business operations and makes tax time, all that much easier.

Tip #2 - Keep All Your Documentation Throughout the Year in One Place

As part of your business tax preparation plan, make sure you establish a routine to keep track of all your documents. Find a drawer, file cabinet, or other location and keep everything in one place. Then, at tax time, you won’t have to hunt down any missing paperwork.

Another good habit is to create distinct expense categories within your bookkeeping software so that your accountant can easily see where the money went. Some examples are travel, meals and entertainment, and office supplies. The more detailed records you keep, the easier it is to find tax deductions at the end of the year. If possible, group things by the expense category and not the vendor you paid.

Tip #3 - Use Paperless Options When Available

Most banks and many other types of businesses now offer paperless options. Going paperless makes it easy to come tax season when you can go online and print annual summaries for things like credit cards and bank account. You can even print statements, copies of canceled checks, and receipts. Some credit card companies split the annual report into expense categories for you. That makes life a lot easier for you and your accountant.

Not only does signing up for paperless billing options work well for tax preparation, but it also ensures you have an off-site backup for your documents if anything happens to the originals. Paperless options also help to save space in your desk and your file cabinet, and it is easy to locate any missing paperwork and retrieve it within seconds.

If you keep digital copies of receipts and other bookkeeping items, organize them into folders by expense category in the cloud (use a program like Dropbox or Box). If you want to be completely paperless, you can even scan and store all your documents that way.

Tip #4 - Keep Your Business and Personal Expenses Separate

Set up a new bank account specifically for your business and pay your business expenses from that. Never co-mingle your personal receipts or expenses with your business. It can become very messy and create red flags for the IRS when filing your taxes.

Tip #5 - Don’t File Your Taxes Yourself - Use a Trusted Accountant who Specializes in Small Business Taxes

Although you could prepare your small business taxes yourself, there are dozens of reasons why it’s not a good idea.

• You don’t know the laws and could miss critical tax breaks.

• Tax return software is fallible and rarely provides the same support a real live account does.

• Business tax returns can be complicated, and you do not want to file a return with a mistake.

Instead, a better option is to rely on a trusted accounting partner who has your back. Someone who knows the ropes and all the complex tax laws will get you the biggest refund or find tax breaks, so you pay the least amount in tax. Tax preparation experts can advise you about tax planning, so there aren’t any surprises down the road. Additionally, if you ever get audited, they can assist and represent you to the IRS and the courts.