How to Prepare Tax Records for Your Accountant in Your Small Business

Whether you decide to hire an accountant to file your small business’s taxes or you try to file your tax return on your own, there are some things you need to consider.

This can be a daunting task, but following a few simple steps can make the process much easier. In this article, you will find tips on how to prepare your tax records for your accountant. We will also discuss the benefits of professional tax advice and where to go for help with your business taxes.

And for most business owners, having an accountant to prepare their income tax returns is just the most sensible option available. Not everyone has the time to become a tax expert – that’s why there are so many tax experts out there to be able to help you.

But in order for a tax expert to help you properly, you have to have some documents and records prepared ahead of time.

Let’s look at what you need to prepare tax records for your accountant to make tax season go smoothly and easily for you and your business.

What do you need to prepare tax records for your accountant

When you have your documents organized and prepared ahead of time for your tax accountant, you will not only save time, but you’ll save the stress of trying to find documents that your accountant needs to prepare your tax return. And you’ll also save money on your accountant’s fees by having everything prepared and ready at tax time.

Some of the most common tax records that you need to have available for your accountant include:

  • Financial statements for your business that include: profit-loss statements, balance sheets, and cash flow statements.
  • Payroll information – what you paid your employees, what you paid yourself and what you paid your contractors (most contractors will also need a 1099 issued to them – check here to see if you need issue 1099s to your contractors).
  • Business expenses summary – this is usually included in your profit-loss statement, but sometimes your accountant may need the backup information about your business expenses, this is usually your meals and entertainment expenses.
  • Asset additions and disposals that happened during the year.
  • Business use of your home details – if you use your home as your principal place to run your business, you can usually deduct a part of the costs associated with using your home on your tax return. These details include the total square foot details of the space you use for your home office, as well as the total square footage of your home. Then you would also include the home bills like your rent/mortgage, electricity, internet, phone, water in your business use of your home details.
  • Motor vehicle expense information. Make sure to keep a vehicle driving mileage log with all of the miles driven for business purposes throughout the year, and other operating costs of your vehicle.
  • A list of all of the estimated tax payments you made throughout the prior year.
  • Last year’s tax return.
  • Charitable donations you made throughout the year.
  • Childcare information – more details about the childcare used is usually asked on your tax return to get additional credits and deductions, as well as the tax deductions for your business.
  • Medical and insurance information.
  • 1099-K’s, 1099-NEC’s, 1099-MISC that you received.
  • W-2’s that you received.

This list is nowhere near comprehensive. Many of the things you need for your business’s tax return will be dependent on your specific business.

If you can get all of these documents ready before sitting down to talk with your tax accountant, you’ll be light years ahead and your accountant may actually love you. Plus, you will make sure you don’t miss the tax deadline and can save time, money and stress.

How to prepare and organize all of these documents

For the majority of these documents, accounting software will help you make sure that you have the income statement prepared properly and are accounting for all of the expenses that your business incurred throughout the year.

But keep in mind there may be some odd expenses and details that you need to prepare for your accountant. For example, if you use your personal vehicle for business purposes throughout the year, write down all of the miles driven (or use a mileage tracking app) for your business.

Remember that it takes a village – prepare as much as you can now, take the time to prepare for your accountant what is needed from you so they can prepare your tax return correctly.

This is another reason why it is so important to have regular money meetings and get the bookkeeping done in your business on a regular basis.

Stop waiting until tax time to do your bookkeeping and get everything organized with your business finances.

When should you prepare tax records for your tax accountant

Technically, this should be done all year long.

But in order to have a tax professional prepare your tax documents for you in a timely manner, the earlier you can get them your documents the better. This means January/February timeline.

When you wait until the end of March or even April, you are risking your tax preparer running out of time to get your tax forms prepared in time for the deadline.

You may also miss out on getting some deductions or credits that are applied to prepare your return.

Or you may have to show accounting records for proof of the deductions and credits you are looking to receive. By having regular communication with your tax preparer you will be much more prepared for tax season and getting your tax forms prepared and submitted on time.

How will this help with managing your small business?

By having all of your income, expenses, and tax documents already prepared for your preparer right after the New Year you can prepare for next year’s taxes while completing this year’s return. Plus it will be one less thing on your list of things to do at the last minute.

Last minute to do’s are just super stressful. The less stressed you are, the better you will run your business and the less you will end up forgetting about.

This way you are organized with all of your business’s tax income and expenses for this past year, as well as ready to start with the current year to continue to stay ahead of the game.

What are the benefits of professional tax advice?

A professional can prepare your tax return accurately, prepare it in a timely manner, research any questions the IRS has about the info you have provided to prepare for audits, and prepare future tax returns.

If you are audited by the IRS, being prepared with an accurate set of books will protect your business assets from being seized. When your preparer goes over your books for the year, they should be able to show how much money was spent and where it went. In addition, it will prepare you for what you expect the outcome of your return will be before going over it with a preparer or directly to the IRS.

This also makes doing your taxes a lot less stressful.

It’s much less stressful to prepare documents throughout the year for your preparer, as well as prepare quarterly. This way you will not be scrambling at the last minute asking yourself “where did those expenses go? What about those receipts? Or I don’t even remember what that is?!!”

By preparing all your tax records now, you can reference them quickly and easily when your preparer is ready for you.

What are the issues that can arise from filing your taxes late?

Issues that can arise from incomplete books or filing your taxes late include:

•Failure to file penalty of 5% per month up to 25%.

•Late fees on tax preparer preparer for not submitting timely.

•Penalty of $89 per form if you miss the deadline.

If IRS sends a notice of your return, preparer will have to prepare amended tax return with penalties and interest.

•If preparer prepares an estimated tax payment voucher and it is not sent to the IRS on time there will be no penalty imposed if it is paid within one year of filing. And again all late fees still apply.

•Tax preparer charges for time spent on preparing tax return and getting all of the documents ready to file your tax return.

•Tax preparer not available to prepare an amended return if needed.

Where to go for help with your business taxes

When it is time to file your tax returns, where can you go for extra help, assistance and to just get your questions answered?

You can visit the IRS website for more info about your specific business type such as how to prepare taxes, what deductions you are allowed, and much more information. The site also contains links to tax preparation software that you can purchase online or download to prepare your taxes yourself.

But not all of us like doing our own taxes. So you can prepare your own taxes and just get a second opinion from a preparer or you can prepare your return yourself and get a preparer to double check it for accuracy, research any questions the IRS has about the information provided, and prepare future tax returns. So where do you turn?

If you feel like you need even more help with preparing your returns, going through a preparer is an option. But not all preparers are the same.

Some tax preparers will prepare your return and if you have questions about it they can’t answer, then they will hand off the return to someone else. Which is risky because what if that person doesn’t know more of the answers? Or can’t explain why they did a certain something?

So what to do?

There are preparers that prepare returns and can also prepare future tax years as well. These preparers prepare many different types of business taxes and will always be the best option for your continued needs.

Just searching online for “tax preparers” may not be the best option.

Did you know that ANYONE can call themselves a “tax preparer”? ! ? ! No education or testing requirements!

When you are looking for someone, make sure they have some qualifications and education to file tax returns and represent you in front of the IRS. Do a little research.

Preparing your Financial Records for preparation of your tax returns

When tax time rolls around, it’s important to have all of your documents and information ready. This will make the process much smoother – for both you and your accountant.

By preparing throughout the year, you can avoid scrambling to find everything at the last minute. And if you’re doing your own taxes, having everything organized will make things a lot easier.

So where do you start? The IRS website has lots of helpful information on how to prepare your business taxes, as well as links to tax preparation software. If you need a little extra help, there are also preparers who can prepare your return for you – just be sure to do some research before choosing one.

And lastly, prepare your records before the tax preparer gets to work. This makes everything run much more smoothly and you’ll be able to see your taxes like never before. And maybe even enjoy tax season.

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