With tax season upon us, there’s no better time to brush up on methods of managing your business finances. Even if you’ve already filed this year, the following tips can help you prepare for next year. And the best part yet, organizing your business expenses only takes a few minutes each day. Let’s get started.
Businesses can deduct the expenses associated with running a company from their profits to reduce the amount of tax owed to the IRS. This can include anything from printer paper to expensive electronic equipment. However, you may have to prove that these expenses were “ordinary and necessary”—particularly if you get audited—which can be done through record-keeping.
Keep all receipts, bills and checks (even cancelled ones). At the end of each day or week, load these documents into your accounting software for safekeeping. Assign your various expenses to categories, such as utilities or office supplies. This allows you to easily view your categorized expenses for both tax purposes and when reviewing your budget each year. And remember, don’t throw away the paper copies of receipts and such; hold on to them for seven years in case the IRS requests to see your records.
Brush up on tax-deductible business expenses. While you can deduct the cost of a flight when going on a business trip, you cannot deduct the meal you have with an old friend who happens to live in the area. Keep a detailed log of similar business expenses, such as vehicle mileage and gas usage when using your car for business.
Managing finances can be tricky, especially when it comes time to prepare your taxes. If ever in doubt, hire a CPA or other finance professional to help sort out the numbers to ensure your business’ financial stability and legality.
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