Preparing Now for a Smaller Income Tax Filing Next Year
As the 2015 tax year has ended, it’s time to start preparing for next year. To help you form good habits now, I have provided a few pointers….
A good accounting program is key to managing your business finances. It’s nearly impossible to make good business decisions if you don’t know how much money you are actually making each month. Contrary to popular belief, you don’t need to be a whiz at accounting to be a good bookkeeper for your business. Talk to your ISBDC Business Advisor if you need help choosing the right accounting package for your expertise level. And, remember, the more work you do yourself, the less you’ll have to pay a professional come the end of 2016!
Make a habit of using your business bank account exclusively for business, and resist the temptation to use your personal account as a back-up for funding business expenses in a pinch. By ensuring all sales monies are deposited into your business account, it will be easy to make sure you capture all of your income each month as total deposits will equal total sales. And, the same goes for expenses… if you pay for everything business from your business account, it will be easy to capture all of your tax deductible expenses each month as the bank will effectively do the work for you. All you will have to do is properly categorize each expense…AND you will have a good snapshot of how your business is actually doing each month!
If you need to personally help your business fund an expense, first deposit the money into the business account then pay for the expense out of your business account. Be sure to keep track of these “owner’s contributions”, though, as they are not considered income and will need to be accounted for separately. Likewise, if you need to pay yourself as an LLC owner, write yourself a check against the owner’s draw account instead of an expense account…these withdraws are not a business tax deduction.
Try hard not to get too far behind as the further behind you get, the more work it will be to catch up later on. If you do get behind, talk to your ISBDC Business Advisor about ways to batch transactions together into journal entries to record the basic entries you need to manage your business.
And, most importantly, stay in touch with your ISBDC Business Advisor throughout the year and use him/her as a sounding board for double checking your progress along the way.