Business tax season is upon us, and many companies are scrambling to get everything they need in order. Small businesses can face a disadvantage in the accounting and tax world when compared to larger companies that have internal accounting departments. There can be a lot to learn, a lot to track, and a lot to file with the government each year. If this is your first season filing business taxes or if you simply don’t understand small business accounting, you’re in luck. Here are six frequently asked questions, answered to help you make informed accounting and tax decisions.
How much record keeping is necessary?
In business, you want to maintain an exact record of every cent you earn and spend. That includes maintaining careful records when it comes to employee payroll, accounts receivable, purchases, and other expenses. You will need all that information to determine how well your company is doing financially. You will also need receipts and bank statements to file your annual income taxes for your small business. That means a decent amount of record-keeping, which will only increase as your company grows over time.
How do I know what expenses are tax deductible?
What is deductible can change in any given year. The IRS is constantly revising and updating the tax codes. That is just one of many reasons why retaining the services of an outside accounting for both regular accounting/payroll and taxes is a good idea. Your accountant will be up-to-date on what can and can’t be written off, and can help you maximize the potential benefit of your purchases and expenses when you’re filing your taxes. Generally, purchases and expenses deemed necessary can be treated as tax deductible.
What is the best way to maintain accounting records?
For most companies, investing in digital record keeping, such as cloud accounting software or record keeping, is a fast and ideal solution. Digital records can be accessible anywhere and can’t be destroyed by a fire or natural disaster, like physical records. When you regularly update and save your accounting records digitally, you can easily ensure they are up-to-date. Digital records are also easy to share with your outside professional accountant. Physical receipts and documents can be scanned to create digital copies. Basic information like payroll can be input regularly to maintain accurate records.
How do I create tax forms for my employees and contractors?
Many times, weekly payroll withholdings and other critical tax documentation can be too difficult for a small business. Working with an outside accounting firm makes determining accurate withholding amounts likely the easiest way to perform this task. You can also use certain kinds of payroll and accounting software to determine payroll withholding amounts and to generate end-of-year tax forms for your employees.
How do I ensure my business taxes are properly executed?
There are common tax and accounting software packages available that can help you file business taxes. Unfortunately, while they may offer you accuracy checks and even sell audit insurance, programs don’t have the excellent eye for detail and ability to solve issues that an actual accountant does. If you want to ensure your business taxes are accurate and your tax burden is minimized, the best approach is to retain the services of a professional accountant or tax specialist.
Should I outsource my accounting to an outside professional?
In most cases, the answer to this question is “yes.” When you consider how many hours you or another member of your staff will spend on record keeping, accounting, payroll, and taxes, it can often be more cost-effective to hire an outside professional for accounting and tax needs. Additionally, a professional services offers greater peace of mind than doing it in-house and relying on your cursory understanding of accounting and some complex, overpriced accounting software for all your needs. If you’re looking for a professional bookkeeper, contact us today!
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