How to Get Ready for Your Tax Appointment as a Small Business

If you’re meticulously planning for income taxes year-round, making a tax appointment with your tax advisor probably doesn’t induce anxiety. Maybe you have all required documents neatly organized in folders, or you’re using an accounting application that you’ve kept up with conscientiously throughout the year, so your tax advisor can run the reports he or she needs and get any other relevant information and forms from you.

But if you have trouble staying on top of your bookkeeping, that kind of organization may be a stretch for you. So, how do you get ready for your tax appointment with nothing organized? You can’t go back and do things differently. Start where you are now.

Report your income accurately while finding every possible expense that can be used to offset it and reduce your tax obligation. Tax advisors can help to identify tax deductions that you might have missed, but you can help them by being prepared with proper documentation.

1 – Organize Tax Documents

Get started when you begin receiving your tax documents. Tax advisors’ schedules get busier closer to tax time, so try not to procrastinate.

If you’re self-employed and haven’t been tracking tax-related expenses all year, prepare yourself for some work.

Go through your check register or credit card statements to identify possible tax-deductible expenses. Consider creating an Excel spreadsheet with your expense entries that you can give to your tax advisor. Look for entries pertaining to expenses in areas like:

  • Technology (computers and peripherals, internet costs, software, etc.)
  • Business-related travel
  • Office rent and supplies
  • Insurance and professional fees
  • Mortgage interest or rent and utilities (if you’re claiming office-use-of-home)

Going forward, consider keeping a separate business-related checking account and credit card.

2 – Tally Sales Totals

If you only have income that’s reported on 1099s, that side of the equation will be easy. If not, you’ll need to provide your own sales totals. And if you’re a product-based sole proprietor who has inventory, your accountant will need a lot of other numbers to calculate your cost of goods sold.

3 – Got Employees?

If you have employees, you’ll of course have to supply your tax advisor with numbers and forms that go beyond these more basic expenses. You’ll need to produce W-2s and W-3s, as well as your Form 1096 and any 1099-MISCs. Your tax advisor will need your federal and state payroll information (Form 940, 941, etc.) and your contractor and benefit expenses.

Anything you paid to employees for services rendered must be reported. This includes health insurance and other benefits!

4 – Consider Streamlining Accounting By Digitizing

If you’re doing your accounting manually, no one needs to tell you how time- and labor-intensive the process of preparing for your tax appointment is.

There’s a better way. Cloud-based accounting applications like Wave track income and expenses and help you estimate your quarterly taxes to full-featured, double-entry accounting websites. Using a solution like Wave, you can connect to your financial accounts online and find the transactions you need in report or statement format is much simpler than thumbing through stacks of papers.

5 – Start Planning for The Next Tax Year

Instead of breathing a sigh of relief once your taxes have been filed, take some time to plan. How can you be better prepared for next years’ taxes? What income and expenses should you pay special attention to so that you can make adjustments before year-end?

Then, once your tax advisor has had a chance to catch their breath after tax season is over, consider making an appointment to talk about tax planning. If you get your advisor more involved in your accounting process by creating reports, reconciling accounts, advising on tax-related expenses, and more, you won’t feel that familiar sense of dread come tax time next year.

Ready for some year-round? Learn more about the Block Advisors’ Small Business Tax Services.

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