It can be tough to complete your personal taxes, but if you've started a business, doing your taxes can be even more difficult. That's why it's important to take some steps throughout the year that will make tax preparation easier for you when the time comes. Use these suggestions so that you are ready and not overwhelmed when you need to prepare your taxes.

Open a Checking Account for Business Only

A mistake that many new business owners make is that they continue to blend all of their money together. They use one account for business supplies, personal groceries, marketing, personal vacations, and other items without separating out their business finances. This can create a nightmare when it's time to prepare your taxes, as you will need to sift through your entire account to ensure that you have accurate figures for your business' income and expenses and properly estimate your tax responsibility.

That's why it is vital to open a checking account that you only use for business. Once that account it open, refrain from using it at all for personal items; this can be a challenge when you just want to buy "one" thing or "pay it back later." You might make some mistakes, so every month, look over your business account and highlight any personal items that were included so that you can be sure to deal with them properly when doing tax calculations.

Know the Official Term for Those Working for You

If your business keeps growing, it is inevitable that you will pay people for doing work for you. However, the way you classify those people has some tax implications. Typically, you will engage with employees and independent contractors. Employees are typically those whose schedule and methods you dictate, while contractors usually complete individual tasks or projects and deliver them to you.

Why does this matter? The wrong classification can cause you a lot of trouble when you prepare your business taxes. If you have employees working for you, there are a series of taxes you need to pay on their behalf, including social security and unemployment insurance. You will be responsible for those costs and possibly for fines if you aren't handling the costs correctly. If you don't know whether you've got contractors or employees, consult the IRS directly or talk to a small-business accountant.

Make a List of Daily Accounting Tasks

Like most self-employed people, you may feel that there isn't enough time to do everything that must be done. It can seem okay to let receipts pile up, thinking you'll get to them later, or you may forget to log your driving hours because you left a pen inside the house, but if you aren't taking time for accounting actions each day, you might find that tax time is extremely overwhelming and tax preparation is harder than you expected it to be. Make a list for yourself that you check and complete each night. It might be a list that only includes filing invoices and printing out deposits, but doing this will make things easier when it is time to prepare your taxes.

Using the tips here can make tax preparation a simpler process when that time of year comes around. Ask your small-business accountant for additional tips. For more information about doing taxes or for professional help, contact a company such as The Callen Accounting Group, PLLC. 

Share