Is your year end coming up soon? Here are five key small business tips to help you through tax season.

When your businesses’ tax season next rolls around, this may be the year you ask: “do I hire a professional, or do you roll up my sleeves and play accountant?” Either way, it is crucial to begin to ensure you’re prepared today.

The hardest step is always the first. Let’s dive right in and prepare to file this year’s return.

1. Keep Record of All Pertinent Financial Records

You can’t build a house without a hammer. You can’t file your taxes without records. Ensure that all records are accurate, keeping anything and everything you might need. What do you need? If you’re not sure about a certain bit of information, keep it. It’s better to find out you don’t need something than to be scrambling for a document you shredded months ago come tax time. There is plenty of software out there to make this step a regular part of your business practice such as FreshBooks, so do some research and find what programs will optimize your record-keeping.

2. Determine Which Financial Documents You Need

You probably already know that the amount of data you need to file is overwhelming, but luckily the first step will make this a breeze. To get you started, here are some of the typical documents small businesses should have prepared:

  • Bank accounts and credit card statements
  • Asset purchases
  • Last year’s tax return
  • Payroll information
  • Partnerships
  • Company retirement plan documents
  • Business expense receipts

Being prepared from the beginning will give you peace of mind and avoid any last minute digging for important documents; or worse, omitting crucial information for the sake of not having to find it.

3. Lay Out All Income and Expenses

Two of the most important factors for growing your business are also crucial to filing. This is where being prepared will save you the most time. Keep in mind, any and all income payments received from the sale of property or services must be reported.

Income may include:

  • Checking and saving interest (Form 1099-INT)
  • Sales numbers
  • Gross receipts
  • Rents received
  • Other unclassified income

Expenses may include:

  • Wages
  • Office rent (for a home office, a portion of your rent/mortgage)
  • Insurance premiums
  • Fees (business consultants, accountants)
  • Advertising
  • Phones and Internet fees
  • Office supplies and equipment (furniture, computers, miscellaneous materials)
  • Interest paid for loans

It is important to consult, if necessary, with a professional Certified Public Account (CPA) to ensure all of your bases are covered and no mistakes arise in order to save time and money.

4. Maximize Deductions

Once you’ve determined the flow of your resources, take a closer look to find where you may be able to avoid taxation. As a sole proprietor, partner, or corporation, a deductible expense must be both ordinary and necessary; ordinary being common to your trade and necessary being helpful for your business.

Business expenses that can be deducted do NOT include capital and personal expenses, but rather:

  • Business use of your home
  • Business use of your car
  • Employees’ pay
  • Employee benefits
  • Retirement plans
  • Interest paid for business loans
  • Insurance for your business
  • Travel directly related to business
  • Depreciation records

By taking advantage of all allowable tax deductions, you can save a substantial amount of money – money that can be redirected back into the business. Solid record keeping is imperative to achieve the myriad of tax benefits of owning a business.

5. Hire a Professional

The simplest way to ensure all the necessary paperwork is completed and all allowances are maximized is to hire a Certified Public Account (CPA). You may have an accountant, however this is a general term. A CPA is simply a specific type of account who has passed a licensing examination, while many accountants have not.

While CPAs must continue their education to keep up to date with current regulations, accountants are not required. Further, accountants have a limited ability to represent your business in the event of an audit. A practical hierarchy can be allowing an accountant to complete routine day-to-day record keeping and complete tax returns, while a CPA oversees the process and assists with crucial tax decisions. CPAs may charge more than standard accountants, but you get what you pay for. Not only can they assist with business decisions, but if the IRS comes knocking, they’ll be there to answer. To protect your business and what you’ve built, consider hiring a professional capable of representing you and executing on your behalf.

No one looks forward to tax season. “I have to complete extra work in order to pay more money?!” We get it. By following these simple steps and taking action early, you can minimize time and money spent and return your focus to what really matters; growing your business. 

For more information on maximizing business productivity and limiting the amount of stress tax season presents, don’t hesitate to contact us.

E&E Professional Accountants has years of experience in assisting businesses with their accounting needs. We are founded and managed by an experienced corporate auditor and a former CRA tax auditor. Feel free to contact us for assistance with all your accounting and bookkeeping needs.

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