Taxes are complex for many filers reporting income beyond payroll jobs. The more nuanced the income, the greater the complexity. Small business taxes can be a major effort because multiple sources of income often exist and due to the myriad deductions most businesses are eligible to apply against taxable income.
The use of reputable tax services helps remove a lot of the headaches associated with tax preparation and can often pay for itself through the improved planning and knowledge an accountant brings to prep and filing. Before choosing a tax service, there are a few things a business can do to streamline initial sessions, paperwork, and tax filings.
Gather business documentation
To file federal and state income tax returns as well as other tax documentation, tax services need to have all major business details on record and may want copies of all relevant documentation. This can include social security numbers, articles of incorporation for LLCs, state sales tax permit numbers, payroll data for employees, and more. As the search for a preparer commences, compiling this information and making photocopies can help the accountant or preparer set up physical or data files for the business and prepare for tax filings.
Sort purchase receipts
Reviewing income and expenditures to properly report revenue and itemize deductions is one of the biggest jobs a tax service faces with small business taxes. Accurate recordkeeping designed for sharing is essential, and it can help an agency better prioritize the tax needs of a small business during initial interviews.
Purchase receipts, leases, and invoices for expenditures like office equipment and supplies need to be retained and then filed according to expense type as much as possible. Any purchases that may seem ambiguous, such as tablecloths for a client event or plaques for employee recognition, can include a brief note explaining the nature of the expenditure for ease. These receipts can be cataloged physically or maintained in a digital bookkeeping program with files that can be shared with the accountant. Other expenses, such as wage and benefit costs and sales tax remitted, also need to be documented and stored for income tax purposes. A tax preparer will review current recordkeeping systems and suggest any improvements to help their personal workflow but should find it easier to get started with clear records.
Sort revenue and fees
While tax services are extremely helpful, they are not full bookkeeping services. Preparers need to be able to validate all income reported and any fees associated with that income but are not necessarily invested in how the business maintains those records year-round. For streamlined organization and better detail, it can be helpful to segment revenue in a logical way, such as by point of origin. An example would be for a retailer with a website, storefront, and remote sales at events to separate income for web sales, register sales within the store, and sales from the mobile units. This allows for easy allocation to different divisions and also helps properly assign any fees, such as credit card processing fees, commissions to an event host, or platform fees for online retailers, to the appropriate accounts. The tax accountant can then more easily validate these components when calculating total receipts.
Contact local tax services to learn more.
My father owned his own business, but he lacked a lot of the actual business operation knowledge, including how to manage the books and the accounting. After seeing him struggle with some past due taxes, penalties, and levies, I knew that I had to learn as much as I could about business accounting before I ventured into the workforce. I did just that, and then decided to share everything I've learned with others. I hope that the information here helps you to better understand the basic accounting as well as the benefits of hiring professional accountants to help you with those things that are beyond your expertise.