Keep accurate records to avoid tax stress
One thing many people give up when they become small business owners is the “luxury” of paying taxes only on April 15. Depending on your location and type of business, you may have to pay one or more commercial and revenue taxes several times a year. If you keep good records, you can eliminate the worry and complications of these filings. The key is to create a recordkeeping system that is consistent, organized and comprehensive.
Today, accounting software makes sense for even the smallest businesses to record and reconcile transactions. Whether you use a manual or computerized system, though, your goal is to be able to document your business activity for tax purposes as well as develop a picture of how your business is doing at any given time: what is owed to you and how much you owe.
All funds passing through the business should be documented in your checkbook and logged into the general ledger, which serves as the master record of your business’s financial transactions.
Even if you are a solo entrepreneur, you should maintain a dedicated bank account for all business transactions, keeping them separate from your personal or household expenses. This account is a master record of the financial history of your business. Deposit and enter all cash and check receipts into this business account and post all expenditures through it. This ensures that all incoming and outgoing funds associated with the business are properly documented. If you do not have a business name, open the bank account in your name as a business account.
A petty cash box can take care of advances for small day-to-day expenses such as parking or postage. However, you want to limit the number of employees who can disperse these funds and require signed receipts for any use of petty cash.
Make sure you maintain a calendar of all deadlines for filing returns and making payments on state, local and federal taxes. The IRS can provide additional pointers to help make your tax preparations less complicated. Forms, publications and other information are available at www.irs.gov.
If you would like to discuss business taxes and recordkeeping, contact SCORE Grand Rapids. SCORE counselors provide free, confidential counseling to help you develop, prepare and improve your business. For information on SCORE Grand Rapids, and the workshop schedule go to our web-site www.scoregr.org.
Get free and confidential counseling with SCORE, 111 Pearl Street NW, Grand Rapids, MI 49503. Call (616) 771-0305 or email firstname.lastname@example.org.