Learn How to Prepare for Tax Season Now

Learn How to Prepare for Business Tax Season Now

What happens when it’s time to pay your business taxes? Do you scramble to find all the documents and information you need? Are you unsure of what to do with the information you have?

You need to get organized before tax season arrives. In fact, you should prep for tax time all year long. Continuous organization and preparation are ways to break your pattern of rushing and flailing at the last moment.

How to prepare for tax season

We might not be in the heat of tax season, but you should still have tax preparation on your mind. Use the following small business tax tips to make tax season easier by preparing all year round.

Organize your records

Your business financial records need to be in order. This includes all your paper statements. You should keep documents such as receipts, bank records, credit card statements, voided checks, and invoices.

You need an organization method to store these records. You might use a paper filing system, such as filing cabinets and file folders. You might also use a digital system where you scan the documents into your computer. Once the documents are on your computer, you can organize them in folders on your computer or in the cloud. You can even keep both paper and digital files to be sure that you have the documents on hand come tax time.

Say goodbye to unnecessary tax season-related stress.

Download our free guide on 10 recordkeeping tips to make tax time a breeze!

Monitor your financial statements

There are three important financial statements you should regularly look at: your balance sheet, income statement, and cash flow statement. These three statements will give you a realistic picture of where your business is financially.

Your financial statements can also give you an idea of what your future business tax forms will look like. You can compare your current finances to your previous tax returns to determine if you need to make changes.

Separate business and personal records

Filing your business taxes will be easier if you keep your business finances separate from your personal finances. By separating finances now, you don’t have to separate them at tax time, which would require you to remember information about transactions that took place a year ago.

Start by opening a separate bank account for business. Have separate credit cards, checks, and recordkeeping systems. Pay for business expenses only with business money—never with personal money.

Consider deductions

Throughout the year, think about what deductions you can claim on your business tax return. If you think you will be able to deduct something, make sure you keep a record of it.

You can also do things before the end of the year to increase the deductions you can claim. For example, you might purchase needed equipment, make small business charitable donations, give bonus pay to employees, and host a holiday party. Before you spend money that you plan to deduct, make sure your purchase will actually qualify for a deduction.

Reconcile bank statements

Bank statement reconciliation is the process of comparing your bank statement to your accounting books. The bottom line of each should be the same amount. Doing bank statement reconciliation helps you catch errors and keep accurate accounting records.

You need to reconcile your accounts regularly. If you don’t, a year’s worth of reconciliation will need to be done before you file your taxes. Otherwise, you might report the wrong numbers on your small business tax return.

Record tax filing dates

Mark the tax deadlines on your calendar so you don’t forget them. Set reminders if you need to.

Your business tax deadline will depend on your business structure. If you own a sole proprietorship, you must file Form 1040 with Schedule C by April 15.

If you own an S corporation, you must file Form 1120S by March 15, or by the 15th day of the third month after the end of its tax year.

A corporation must file Form 1120 by the 15th day of the fourth month after the end of its tax year.

Partnerships must file Form 1065 by March 15, or by the 15th day of the third month after the end of its tax year. Partnerships must give Schedule K-1 to partners who will use the form to fill out their Form 1040.

Ask your accountant questions

If you have questions about your business taxes and your best tax moves, don’t let them go unanswered. Write down your questions and bring them to your accountant.

Your accountant can make sure your business is on the right financial track. They can tell you what records you need to keep, how long to keep them, how to record your business’s money, and more.

Accurate accounting records can simplify your business taxes. Get your financial records in order by using Patriot’s simple online accounting software. It’s designed for small businesses, so it’s easy to use. Get a free trial today!

This article is updated from its original publication date of 4/8/2013.

This is not intended as legal advice; for more information, please click here.

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