When it comes to managing personal finances, it can be tricky to know how to proceed. While many people start focusing all of their energy on taking care of the things they need at the moment, the truth of the matter is that there are a lot of things you can do to disrupt your finances that may be easy to ignore at first. For starters, it is crucial to move forward and identify tax issues, even if you haven't focused on them quite yet. Check out these short posts to learn more about how you could be faced with tax problems, and how to resolve the situation for the long run.
As a small business owner, you have to play a lot of different roles, and when you're busy managing a team, finding new clients, perfecting your offerings, and handling everything else, bookkeeping can fall by the wayside.
Unfortunately, if you don't devote some time to bookkeeping, you may arrive at tax time and not know what your deductions are, but luckily, there are steps you can take to mitigate this issue.
1. Look Through All Business Account Statements
If you have a bank account that you use exclusively for business, all of the expenses in the account should be business deductions. In this case, you can simply claim all these expenses as deductions, but you will need to go through your statements to group various expenses together.
2. Go Through Personal Account Statements
Ideally, you should have a dedicated business account, but in the beginning, many small business owners use their personal accounts for business. In this case, you need to look through your personal monthly account statements and look for business expenses.
To make this process easier, print out your statements and circle business expenses. If you have multiple accounts (bank, credit card, etc.), remember to go through all of them.
3. Examine Orders or Statements From Companies
If you order a lot through any one company, look through your orders for them for the year and figure out which expenses were for your small business — and make sure you're not duplicating any expenses that you already found while completing step one or two.
This approach can also be helpful if you have to write off utility or communication expenses. In most cases, you can sign into your online accounts and pull up all your statements for the year.
You may also want to contact vendors and ask for year-end statements. For instance, if you have been buying food from a supplier for your restaurant and you haven't noted the sales in your records, you can reach out to them for a year-end summary.
4. Reconstruct Mileage Records
You can deduct vehicle expenses or mileage when you use your vehicle for work. You are supposed to track these expenses through the year, but if you haven't been, take some time to reconstruct them.
For instance, if you remember that you drove somewhere for a work conference on a certain day of the previous tax year, figure out the distance to that city and note the miles in a log. Then, repeat the process for all business travel during the year, while being very careful not to overstate anything.
5. Set Yourself Up for Success Next Year
So you don't face this issue next year, make sure to set yourself up for success. Invest in some bookkeeping software and devote time to tracking the numbers on a regular basis. Or, consider working with a professional who offers small business tax preperation and accounting.
Share9 March 2021
