While some small business owners do their own taxes, many opt to turn over the job to a qualified accountant. An accountant is more knowledgeable about the details of the tax code and the types of expenses a business can claim as deductions. Because accountants work with taxes and finances all the time, they’re also less likely to make mistakes that can get you into hot water with state and federal tax agencies.
Every business owner wants to maximize their deductions, minimize their tax expenses, and avoid an audit. The deductions you can make vary depending on how your business is incorporated, but there are certain financial documents your accountant will need, no matter how your business is set up. To get the best possible outcome, here are some things your accountant needs from you.
This includes records for any financial transactions that involve your business. Examples include:
- Bank statements
- Rent/mortgage statements from properties your business owns or rents
- Utility bills
- Landline and cell phone bills
- Permit and licensing fees
- Training costs
- Payroll costs
- Contributions to retirement, insurance, or health care funds
- Expenses incurred on business trips
- Marketing costs
- Cost of entertaining business partners, clients, or customers
If you run your business out of your home, you should also turn over your personal rent or mortgage statements, repair bills, and utility bills. You may be able to deduct a part of the cost.
List of Assets and Asset Activity
Give your accountant a complete list of all of the company assets. This can include equipment such as computers, company vehicles, retail inventory, and any real estate owned by the company. If you bought, sold, or disposed of any assets during the year, turn over the records. If your statements don’t indicate the nature of the asset, be sure you note the details in your accounting software.
Receipts are necessary to provide proof in case of an audit. You can turn over paper or electronic receipts, but most accountants prefer electronic receipts. They’re easier to keep track of, sort, and store. If you do opt for paper receipts, keep them organized by date or type of expense. Keeping them out of the sunlight is also a good idea, because the thermal ink used on most receipts can fade over time. You don’t want to lose out on deductions just because you can’t find or can’t read your receipts.
If you use your personal vehicle in your business, the IRS allows you to deduct the running expenses and depreciation incurred when you use the vehicle for business. For example, if you use your SUV or truck to carry stock from your home to your business retail location five miles away five days a week, you can claim the 25 miles per week as a deduction. Keep a detailed log of the time, purpose, and mileage of each trip and turn the completed log over to your accountant.
Whether you’re hiring an accountant or doing your business taxes yourself, Cougar Mountain Software’s Denali accounting solution can help. Your accounting software along with our customer care representatives trained in accounting can make organizing your business tax information a smooth and painless process.