Tax preparation is one of the most important tasks, yet most entrepreneurs take it for granted. If not done properly, this can be really tedious to do. It is highly advisable that you start doing this at the start of your business to maintain an organized system as your company flourishes. Read on to learn more.
- The most logical thing to do when preparing your taxes is to make sure that you have a business license first. Regardless what kind of business, either it is big or small, you need this to prevent the IRS coming after you in the long run. Begin by contacting your country’s Department of Revenue. Tell them that you want to apply for a business license. They will immediately give you instructions as to what and how to do it and where to go. More often than not, you will be given a set of documents and requirements that you need to submit. Read through these papers very thoroughly and make sure you follow every bit of instructions given. Prepare all the necessary documents and compile them in one folder.
- As soon as you have your own license, keep it in a safe place where it can be easily seen at your office. By this people around you (customers, clients, neighbors) and the authorities will know that you are a legal establishment and that there is nothing to worry about.
- It is of vital importance that you keep all your receipts labeled, categorized and in one location. The more organized you are, the better and easier this task will become. This can also save you from wasting a lot of time, effort and money in the future. Prepare a soft copy of your incoming and outgoing expenditures. It is highly recommended that you use a computer based data program where you can input all these numbers to minimize errors and to have a more organized, automatic system.
- Categorizing and labeling receipts and financial statement is crucial. First you need to separate all expenditures and income per date. Make it monthly then consolidate it per year.
- You then create headings that would easily distinguish each transaction. For example, you will have a heading that says rent, utilities, medical, transportation, shipping, entertainment, food, etc. Sort all your receipts very carefully when doing this and always double check! At first, this can be the most tedious job but as long as you do this consistently, it will get easier by the moment.
- When you are done sorting everything out to their proper place, it is time to consolidate them in the neatest, most efficient way possible. You can easily do this by punching holes (make sure you use a puncher!) on the receipts and put filing clips in it. You then put it in a folder or an envelope. Label accordingly.
- For future purposes, it is advisable that you photocopy each receipt that you have on your file. Receipts tend to fade when it is too old, hence making it really hard to read and decipher. When photocopying it, make sure you put it in the darkest font settings possible for a clearer effect.
These are the things that you need to do in order to successfully prepare your taxes. If you really want to do this the easiest way, regularly and consistently follow these steps. Good luck!