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Oh! The end of the year is coming, a new year will begin and what's the biggest thing on my mind (besides my 2005 marketing plan) - Tax Time. If you're like me, you started out well in the early part of this year keeping all of your receipts together, organizing your budget and keeping track of your business operations but, then by the end of the summer you had a small pile of receipts building up and you may or may not have updated your budget file since then. But now I'm forced to get my paperwork together and, while it's not the worst project in the world, it's no day at the beach either. So, what can be done throughout the next year, to make tax season 2005 a sunnier walk through the park? Here's some tools that I use and also some new ideas to fit easily into your business lifestyle. Whether you have a professional accountant or take care of your own financial reports and tax filings, you still have to build a system for tracking and storing your business transactions and records. Start-ups and individual entrepreneurs should also get into the habit of keeping receipts for business transactions, recording what your income is and what expenses the business has. This is basic information that you will need in order to file your taxes. The structure of your business as either a Sole Proprietorship, Corpation, S-Corp or LLC will determine which forms you are required to complete. Visit those websites below to find out more information. What's important to realize is that if you build a foundation of record keeping from the beginning, you will make things much easier for your business in the long run. And if you have a history of lousy record keeping you can still make a change. Quicken is great for your personal budgeting needs. You can track all household transactions and even those related to your business and create reports to make income and expense reporting easier. Account downloading features are real helpful and relieve the time taken to enter individual transactions. Quickbooks is great for capturing your business transactions and creating the three most important statements needed for your business tax filings - Profit/Loss, Income/Expense Report and Balance Statement. These softwares can be the crutch of your computer filing system, but if you don't have a computer, your paper filing system should not be overlooked. Your paper filing system allows you to separate your business bank account and any business credit accounts you have. Placing all of your files in one box or in a pile on your desk will only lead to lost information, incorrect accounting and, if you really miss something, monetary penalties. You must assign a folder for each account separately or for very closely related subjects. And for your receipts it's a good idea to purchase an accordian size folder and as you acquire your receipts, you place them in a crease for that month. If you have a larger business, you can devote an entire folder to one month or a section of a file cabinet. What matters most is that you collate the information so once it's time to go through your information for tax time, it's readily accessible. You don't have to do much to keep your paperwork in order. If you R.E.L.A.X., tax time can be a good opportunity to go over your financial information for the year and make future predictions for the year to come, and for some us a chance to get back some of our hard earned money. Set up your paperwork with these thoughts in mind and you'll be on your way to tax filing heaven and command a heartfelt thank-you from your accountant. R - Reevaluate your opinions about paperwork. Some people, especially those with accountants, believe that the accountant will sift and sort through their paperwork, so they don't have to keep things orderly, they just don't have the time to do it. While this may be true, what you should realize is that if your accountant is spending time, getting your paperwork in order, that's less time they can spend filing your forms to receive the best refund within Generally Accepted Accounting Principles. E - Expect that you will sometimes get so busy that it is not easy for you to update your information every month. This is especially true for start-ups and entrepreneurs who often are working by themselves. You don't have to forsake your whole system just because you weren't able to update this month, when the next month comes around make it a priority to catch yourself up. Catching up for one month is alot easier than catching up for the last six months. L - Learn from your previous mistakes. If you realize that every year, you stress yourself out and spend hours getting your reports together because you have to go through a complete year of receipts, bank deposits, etc, it's time for a change. If you never had software to keep track of your transactions, invest in it and if you don't know how to organize a paper filing system, so you can designate file space for your records, hire someone to do it for you. Don't keep making the same mistake year after year, your time is valuable. A - Always be consistent. This may seem simple but if you name your April folder, Apr Receipts on your computer, use that term on anything else that will group all of your April receipts. This consistency in headings, titles and group names will be a great help for you and those that must go over your information. If they see Apr Receipts, 04 Receipts and April Receipts, they may second guess as to whether these are related. X - 1X1=2. You may be thinking, huh? That's because if you claim you have $50 in meals and entertainment expense but you only have receipts for $35 you can leave yourself vulnerable to penalties for incorrect accounting. Although, the example given is not likely to flag an audit, (fewer than one in 100 tax returns are audited) you want to build a foundation based on satisfactory evidence of your income and expenses. Penalties for under-reporting income and over-inflating expenses can be a greater pain in the neck than making sure you keep your receipt from your business lunch or logging your marketing campaign expenses. For important dates, new tax information and forms, and accounting tools, visit these sites:
http://www.irs.gov
http://www.tax.state.ny.us
http://www.taxsites.com/state.html
http://www.turbotax.com
http://www.intuit.com |
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