Many business owners are concerned about paying their income tax liability, but far fewer are capable of accurately calculating their tax obligation. Although the burden of tax return preparation is best outsourced to professional accountants, entrepreneurs can take steps to ensure timely and thorough income tax reporting. After all, tax professionals can only know the financial details about your business that you convey to them.
Start by choosing a suitable system for maintaining your business records. This untangles the taxable events of an entire year. The use of technology is typically beneficial. Even a simple electronic spreadsheet of business revenue and expenses permits a computer to perform mathematical functions and minimize human error.
And this is far superior to a haphazard pile of receipts. The spreadsheet provides totals for annual revenue collected and amounts spent on each category of business expense.
Accounting software is even better because it balances revenue and expenses to cash sources, such as bank accounts and credit cards. This double-entry accounting system ensures you haven’t missed recording any transactions. However, professional assistance in knowing how double-entry bookkeeping works is crucial to obtaining accurate output from accounting software.
If you do have regular bookkeeping procedures, aim to examine and understand all the components that make up your financial statements. Go over any uncertainties with your bookkeeper to tie up loose ends.
Lastly, be at the starting line with your accountant to finish your tax return on time, obtain tax-related bookkeeping adjustments, and get suggestions for improvement in the year ahead.