Are you behind on your bookkeeping? It’s more common than you might think. Knowing you are missing essential information for your taxes makes the process of catching up even more stressful.
If you are getting ready for taxes, here are some items for your bookkeeping checklist.
File for an Extension
When your books are a mess, you might need a little breathing room. You can file for an extension, giving yourself an extra six months to file. You don’t need to wait until tax day to file, either. You can file for an extension today if you want.
Don’t think, however, that a tax extension lets you off the hook for paying taxes on time. You are still required to make a tax payment by Tax Day. Estimate what you owe, make your payment, and then start working on your tax return.
You need to file because “failure to file” comes with its own penalty. If you know you won’t make the deadline, and you’re too rushed to get it done right, file for the extension and pay what you believe you owe. It’s possible to file your return anyway and then amend it later, but in most cases, it’s better to take a step back and make sure you file right the first time.
As long as you pay your tax bill, filing later allows you to be more thorough. It’s certainly better than accruing interest and penalties.
Gather and Organise Your Financial Records
From payroll to expenses, gather your financial records and organise them. All of the records should be organised by category:
- Independent contractors
- Equipment expenses
- Business travel
- Office supplies
- Marketing costs
- Charitable donations and tax-deductible sponsorships
- Income from all sources (break into sub-categories if necessary)
If you have other categories unique to your small business, make sure they are included. You can use a spreadsheet for organisation. The important thing is to make it easy to identify expenses and categorise them. Don’t forget to go through your personal credit-card statements, just in case there is a business expense lurking. You will need to properly identify it on the receipt and be able to show that it was a true business expense.
It might take time to track down some of your records, which is why filing for an extension makes sense.
Review Your Expenses, and Look for Credits and Deductions
Once you organise your receipts and other financial information, review them so that you can identify credits and deductions you might be missing. Accounting software can help you maintain your books, stay organised and keep you prepared for tax season, or you can consult with a tax professional for insight on what you might be eligible for.
If you use tax-prep software to analyse your expenses, make sure you use an updated version. The tax code changes every year, so you might miss something if you use an older version.
Filing for an extension allows you to identify more tax breaks and then file your complete return without the need to amend your return, which can be a tedious process.
Prepare Better Bookkeeping for the Future
Finally, once you have caught up on your bookkeeping for last year, put systems in place that allow you to keep better books in the future. Most importantly, set up a filing system for your receipts. This can be a hard-copy system or a system for scanning and organising digital copies. Immediately filing your information and sorting as you go saves time and energy in the long run.
If you don’t have accounting software, consider purchasing and using it. Programs like QuickBooks can help you keep track of all your financial information. You can use it for payroll, invoicing and expense tracking. It’s also possible to use QuickBooks to manage and pay bills related to your small business. Accounting software, combined with a system for organising receipts, can help reduce your headaches and prevent another last-minute scramble during tax time.