Your small business needs every advantage when it comes to tax time. You need to be able to document and verify each and every deduction and expense. You need to have all of your ducks in a row in terms of depreciation, inventory, employees, sales taxes, and more. Tracking all of those records takes more than simply using an accounting system or keeping QuickBooks updated; you need tools that let you track all of that documentation.
Not only do you need to track those records, you need to do so in a way that’s efficient, effective, and accessible.
Here are some tools that can help you with the process of tracking your tax records:
- Mileage tracking apps for your smartphone. One of the biggest hassles when it comes to tracking purposes is mileage. If you have a personal vehicle that you use for business, you’d be silly not to deduct your mileage; yet keeping a daily logbook can be a hassle. Fortunately, there are a number of smartphone apps out there like Mileage Pad that allow you to track business mileage in a relatively quick and easy fashion.
- Tax prediction calculators. There are several sites out there that will allow you to put in some basic information about your business and get some sense of how much you’re going to owe in taxes. Certified Tax Coach offers a free calculator, as do several other sites.
- Electronic records conversion. QuickBooks and the other business accounting software packages all give you the option of attaching a scanned document into their systems. Unfortunately, flatbed scanners can be a pain to use, and take up a bunch of desk space. You might consider instead something like the NeatReceipts scanner. This “smart” scanner is designed not only to import an image, but it will also capture specific information. For example, it will look for the business name, date, amount, and even the sales tax charged when you scan a receipt.
- Backup of records. If you’re going the digital route, there’s always the chance that your data will become corrupt and you’ll lose not just your accounting information, but those scanned receipts and other documents, too. There are plenty of backup options, from online backup services like Mozy or Carbonite to simple offline backups using an external drive. A backup of some sort is essential to efficient and protected tracking of your tax records.
- Physical storage of records. If you’re leery of going the electronic conversion route, you need a good way to store your tax records physically. For many small businesses, that’s mean using a shoebox, or perhaps a series of shoeboxes. This method is not only susceptible to physical loss, it’s also a situation ripe for error. Consider using fireproof filing cabinets, and work out a filing system that’s not only intuitive but easy to use. You’ll also want to document how your storage system is organized so that others can find things in there as easily as you can.
- Separating expenses into categories as they’re accrued. Your objective should be to touch any given record or receipt once and then be done with it. So, for example, you need to be able to classify expenses as you accrue them. Your filing system should have an index, then, that will let you know where to find capital expenditures versus operating costs, for example. This index can take the form of a written document, a spreadsheet, or even color-coded sub folders inside your filing system.
- Distribution of W2s and 1099s. One of the basic tax requirements you face is providing your workers with correct tax documentation. Accordingly, you need to make sure you’re distributing your W2s and 1099s in a timely manner. While you can do this via your accounting package, there are also services like FileTaxes.com that will let you get the information out fast and easy.
- Consider professional help. Some accounting and tax services will offer the option of helping to track your tax records. They may offer on-site storage, off-site storage, or electronic storage of your documents. When you need access to a document, you use the vendor’s system to retrieve that document. If you don’t want to spend your valuable time worrying about managing records, this can be a viable option.
Being able to optimize your tax situation means optimizing your tax records. Look into some of these tools today, and see which might best fit your business.
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