Tips for keeping your fiscal year on track
Good business record management can lessen the stress commonly felt at tax time. Here are some record keeping tips to keep your fiscal year on track:
1. Keep your business and personal expenses separate. This is often times not as easy as it sounds, especially if you do not know what qualifies as a legitimate business expense and what does not. To avoid confusion and stress at the end of the year, you will need to know what expenses qualify as a business expense and which do not.
2. Get documentation for all business expenses. Make it a habit to always get a receipt when you make a purchase for your business. Including the small purchases, which canadd up throughout the year. If necessary, label receipts. This will help you determine if the expense is a legitimate business expense, if you are not sure or if the item purchased is questionable.
3. Use a separate bank account for your business. Deposit all your business revenues into your business account and withdraw only business related expenses or payments. It is best to get a business checking account, in which you receive a monthly statement and your cancelled checks are returned to you. The memo line on the front of each check can document the business purpose of the expense and make record management easy.
4. Use separate credit cards for your business. Keep your personal and business expenses separate by using a separate card for business only. This can make business record management simple and it also helps make your business look more professional.
5. Document business travel by keeping a mileage log. Write down the mileage reading on the odometer at the beginning of the year. Then each time you use the vehicle for business write down the mileage and date. Keep a mileage log in the glove box of every vehicle that you use for business purposes.
6. Keep business records for that particular year together. It will make organizing your business records at the end of each year much easier than having to waste time trying to sort through a scattered mess that is all over the place. It also will be easier to find your business records for a particular tax year, if you need them.
7. Keep your business records for the correct amount of time. You should keep all business related records and tax records for the minimum amount of time, in case of an audit or if you just need a particular record for whatever reason.
Keep track of all new equipment purchased during the year to make recording depreciation much easier at tax time. The details that should be included for new equipment are date of purchase, purchase price, type of asset, make, model, year, new or used. Furniture, computers, vehicles and buildings are fixed assets that contribute to the operating capacity of a business over many years. Fixed assets are treated differently than other expenses because of their long term value. You expense the purchase price of a fixed asset over its useful life, not just the year the purchase was made. This type of business expense is known as depreciation.
To avoid having any problems in the future with employees W-2, W-3, 1099, 940, 941 and 1096 tax forms, be sure to contact employees to review their address and social security number on their paychecks. You will also want to verify that the name on their paychecks appears exactly like their name on their social security card.
Good business record management can make your working life easier at the end of the fiscal year and also throughout the year.