Inclusive Workplaces
Breaking Barriers and Celebrating Women in Tech on International Women’s Day
Blog
How you can avoid tax season anxiety with a bookkeeping assistant
How often do you leave tax preparation to the last minute? Tax season is an overwhelming time of the year for many business owners and it’s not unusual for them to ignore their small business bookkeeping throughout the year.
Every month is an onslaught of entering expense receipts, and invoices, categorizing your entries, reconciling accounts and compiling records. All of this, and more, need to be completed before approaching an accountant who prepares and submits your taxes – ideally, before government deadlines and penalties take effect.
Each year, many businesses start from scratch, scrambling to put the paperwork together to file their taxes. But tax season doesn’t have to be difficult. Filing taxes can be a simple, streamlined process with a little forethought and organization.
This article will highlight 6 easy steps that any small business can follow to make tax season a breeze. These steps will not only help you file your taxes this year but also lay the groundwork for future years, making the process easier over time.
What you’ll learn:
- Know your deadlines – avoid late fees!
- Organize your documents and accounts
- Is your business eligible for deductions?
- Plan ahead for next year
- Stay informed of yearly changes
- Hiring a bookkeeping assistant vs DIY
Sole proprietorship, partnership and corporations – what’s the difference?
Before you start worrying about your small business bookkeeping needs, you need to review what structure you’ve set your business up under. When it comes to preparing for tax season, the main difference between a sole proprietorship, partnership, and corporation is the way in which the business is structured.
Sole proprietorship: For tax purposes, a sole proprietorship treats the business and owner as a single entity, so the owner files their business income and expenses on their personal tax return.
Partnerships: In contrast, a partnership files a separate tax return for the business and each partner reports their share of income and expenses on their individual tax return.
A corporation, being a separate legal entity, would file its own tax return and the shareholders would report any dividends received on their personal tax return. Therefore, depending on the type of business structure you have, the way you prepare for tax season may vary greatly.
Canadian business structures
- You can find more information on various Canadian-based business structures here.
US business structures
- You can find more information on various U.S.-based business structures here.
1. Know your deadlines – avoid late fees!
Who likes late fees? Nobody. Have your documents organized and prepared so you’re not scrambling at the last minute to get everything you need for your accountant. Not only do you want to avoid late fees, but your accountant will appreciate the thoroughness and not having everything dumped on them last minute.
Canadian businesses are required to file their taxes no later than six months after the end of each tax year. U.S.-based businesses have specific tax-related deadlines to meet according to their type of business and/or the state in which they operate. Contact a professional to discuss your deadlines and ensure you file on time to avoid penalties. Click below to review official deadlines for both Canada and U.S.-based businesses.
Canada small business tax deadline information:
U.S. small business tax deadline information:
2. Organize your documents and accounts
As the tax season approaches, it’s important to get organized and gather all the necessary documents and information to file your taxes. This includes keeping track of your income, expenses, and any deductions you may be eligible for. One way to organize your small business bookkeeping is to set up a system for keeping track of your financial documents throughout the year. This could include setting up a separate folder for all your tax-related documents or creating a spreadsheet to track your income and expenses.
With a system in place, now it’s time to get all of your accounts in order. This includes keeping all your bank statements, receipts, invoices, and any other financial documents required by your accountant. It’s a lot of work, but staying on top of your small business bookkeeping by tracking your finances throughout the year will make the process of preparing for tax season much less stressful for you.
A bookkeeping assistant is a perfect tool to take the burden of organizing your documents off your hands. All of the tasks we list below will be organized, categorized, and tracked for you throughout the year. No last-minute scrambling required.
- Take inventory of all your accounts – it’s not unusual for owners to forget about accounts they’ve opened and run into trouble with the government.
- Organize your records and keep them up to date:
– Documents
– Deposit slips
– Bank statements
– Business credit card statements
– Income records
– Sales invoices
– Expense receipts
– Bank deposit slips
– Fee statements
– Contracts
– Categorize everything!
- Our Talentplace portal makes it easy for you when working with our virtual assistants. It includes all of your invoices which are easily accessible and downloadable for your records!
This is another crucial step to help you prepare for tax season before it even begins. Consolidate all digital and paper records of payroll, expenses, and receipts for your operations using a software application designed for small business bookkeeping. Establishing a records management process will set your business up for success each and every tax season, lessening the time you spend on compiling these records year-after-year.
Software recommended by our experienced bookkeeping assistants:
3. Take advantage of deductions
Depending on your type of business or service, you’ll be eligible for various tax deductions, such as those outlined here for Canadian businesses and these U.S. business expenses. Can you deduct expenses associated with your home office? What about the money you spend on food and gas during business trips?
If you don’t take the time to understand which of these deductions you can expense, you may be missing out on saving opportunities. Again, if you’re not sure whether or not you’re eligible for a business expense, contact a professional to help put your mind (and wallet) at ease.
Examples of Canadian deductions:
- Start-up costs
- Supplies – computers, desks, etc.
- Salaries, wages, benefits
- Travel expenses
- Utilities
- Insurance
- More examples here: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html
Examples of US deductions:
- Business meals
- Travel expenses
- Office Supplies
- Depreciation of big-ticket items
- Charitable contributions
- Child and dependent care
- More examples here: https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses
4. Plan ahead for next year
Preparing for the next tax season now is a crucial step in ensuring that you’re able to file your taxes in a timely and accurate manner. By starting your small business bookkeeping early, you’ll avoid last-minute scrambling to gather all the necessary documents and information.
Enlisting the help of an experienced bookkeeping assistant is the best way to keep track of your finances throughout the year. They can help you identify any potential tax savings or deductions pertinent to small business bookkeeping that you may be eligible for. This’ll help you to be proactive in managing your finances and minimize your tax liability. Furthermore, it’s important to take note of any changes in tax laws and regulations that may affect you in the coming year, so that you can plan accordingly.
5. Stay informed of yearly changes
Staying informed of yearly changes in tax laws and regulations is crucial for ensuring that your business is compliant and taking advantage of any new tax savings or deductions available to you.
Tax laws and regulations are subject to change on a regular basis, so it’s important to stay up to date on any new developments that may affect your taxes. Small business bookkeeping requires you to stay informed on these changes. By subscribing to newsletters or following relevant government websites and social media accounts that update tax laws and regulations, you’ll know exactly what to expect. If that sounds like more time than you have available – check out our Talentplace of experienced bookkeeping assistants across Canada and the U.S. who strive to stay informed for you.
Consulting with a tax professional or accountant can also be a valuable resource in staying informed and ensuring that you are taking advantage of any tax benefits or deductions that apply to your specific situation. The combination of a year-round, affordable bookkeeping assistant and the professional advice of a certified accountant will ensure you’re doing everything possible to minimize your tax liability and ensure compliance with the law.
6. Hiring a bookkeeping assistant vs DIY
Having your books in order serves as the foundation for all great tax and accounting services
The reality is that some business owners simply don’t have the time to organize their small business bookkeeping themselves or to properly prepare and organize records in advance of tax deadlines. It’s hard enough running a successful business; tax season sometimes feels like taking on another full-time job.
That’s where a good accountant and/or bookkeeper comes in. If you aren’t in a position to hire a full-time bookkeeper, Virtual Gurus offers a deep talent pool of bookkeeping assistants. With a bookkeeping assistant by your side, tax season will be a breeze. They can help you get everything organized for filling this year’s taxes, and also maintain bookkeeping processes all year long to set you up for smoother tax seasons in the future.
Let us match you with a bookkeeping assistant to prepare for tax season so you can free up your time to focus on key business initiatives and ensure your books are done correctly.
*Updated post as of February 7, 2023
