It’s important for business owners to have their accounting records up-to-date throughout the year, but it becomes even more essential during tax time.
“When the time comes to file your taxes, if you don’t have your data organized and available, tax season can become a huge distraction from running your business effectively,” says Vi Le, of Vi Le CPA.
Le shares valuable advice to help business owners have their accounting records properly prepared and available, and gain the best tax outcome.
Break down expenses
Le points out that because IRS auditors tend to focus on larger numbers, business owners should break down expenses as much as possible into smaller categories.
“In my practice, bookkeeping isn’t simply data entry,” Le says. “It’s also about avoiding combining expenses into a big lump sum to attract the IRS’s attention, as well as categorizing correctly. For example a painting business with large shipping expenses might stand out.”
Keep your books up-to-date
Even with bookkeeping throughout the year, many business owners have not reconciled or cleaned up their data in time. Not having their records up-to-date leaves them frantically trying to get their data updated quickly for their tax preparer to review.
“My advice is to do your books periodically, so you know where business stands, and you can do tax planning according,” Le says. “Waiting until tax time to add up your expenses won’t give you any chance to reduce your tax liability.”
Set your books up correctly
For business owners doing their own bookkeeping, Le advises setting yourself up properly, by choosing the kind of system you need, deciding how you’ll record financial transactions, and choosing quality bookkeeping software.
“Setting up your bookkeeping system correctly in the first place is the key to having clean books, saving you time and money,” Le says. “I’ve been using Quick Books software for 10 years, so I know it in and out. In fact, I’m now offering a one-on-one training course for business owners who want to learn how to keep their own books.
“Don’t wait until your books are messed up to get help!”
Follow Vi Le CPA on Facebook, and call 425-532-6108 or email Vi@ViLeCPA.com for more information.