Taxes are one of those things every company has to take seriously. If you’re a new small business, you need to take careful and detailed records in case you are chosen by the IRS for an audit. Some industries are at greater risk for an audit, like the service industry, people who work out of their homes, and those who claim large deductions. Use the tips below to make this process a little easier for your startup.
Don’t Be Afraid to Deduct
If you keep accurate records and are legitimately entitled to a deduction, don’t be afraid to take it, according to Entrepreneur. You deserve to be able to take every deduction available, especially when just starting out. The only reason to be cautious is if you don’t have the financial records to back up your claims.
Get a Filing Cabinet and Scanner
Keep physical and digital copies of all your tax-related documents. At the end of each business day, scan and upload your documents to a secure storage area for retrieval. Your accountant can use the online copies to complete your taxes, and if you make the files read-only you’ll be able to ensure you have accurate dates for all your receipts.
Keep all of the expense receipts and invoices that you receive, and you should also keep any copies of invoices you send out. You’ll want to ensure you keep records for dividends, rental income, and any machines you purchased. Deductions are available for items you purchase, and you can choose to deduct the current value or depreciate it over several years.
Get the Right Software
Besides having an accounting program, you should also get an inventory management solution and a paycheck and paystub creator program. These work to help you save time and make it easier to track payments to employees at the end of the year. Not only that, but you’ll be able to easily track customer refunds and vendor payments. Check out options at www.checkstubmaker.com.
Create a Tax Account
You never know what kind of bill you might get hit with at the end of the year. Consult with your accountant to determine what percentage of your income you should put aside each month in case you end up owing the government. Your business accountant should be able to give you accurate numbers.
Once you’ve filed your taxes, keep all of your documents for at least seven years. It’s not a bad idea to keep records for 10 years if you are in an especially risky business that tends to have high levels of audits.