I hear you now saying “It’s only September; why would I be ready for next year’s taxes already?”
Many people think that they should wait until the new year has begun to start getting ready for the next year’s taxes. As an accounting firm, we tend to disagree with this for many reasons.
One, what we find is that people will put things off until the last possible moment, and then suddenly start scrambling around trying to pull everything together at the last minute and are unable to find everything they need. Remember, you get to write off your business expenses, but if you’re unsure of all of them you’ll miss out.
Two, if you’ve been writing your mileage down but not properly logging it, if you do it ahead of time that’s one less task you’ll have to deal with later on. Keeping track of it monthly helps you to remember which part of travel was for business and what wasn’t business travel. For instance, if you took a quick trip to an office supplies store and bought something you’ll use in your business, in six months you’ll have forgotten that you did that and missed the opportunity to claim that mileage.
Three, sometimes you forget what items were business expenses after awhile. For instance, if you’re a corporate consultant your business clothes are a legitimate write off, and if you remembered to keep the receipt and write something on it so your accountants know, that’s a good thing. But if you just tossed it into a receipts folder and now it’s months later, you might not remember what that purchase was for unless you went to a specialty shop specifically for clothes.
Four, you might want to think about paying some of your estimated quarterly taxes if your income was high enough so that it’ll reduce some of your tax payments for the new year. This means you’ll have had to be tracking your income as well to make sure you don’t pay too little or too much. And you’ll want to make sure you’ve indicated in some fashion on your bank statements which payments went to that.
Five, bank statements. Sometimes it’s not enough to have them, as you know. For your business account, if you make money in multiple ways and you want to track it all then you probably go through the process of pulling out your statement and going through it marking everything. If you do it ahead of time you’ll save yourself the frustration of coming to certain items and wondering what they were.
These are only some of the things you probably want to think about ahead of time, and with only 3 months left in the calendar year, getting a jump on things would probably ease your mind a bit.
