You love being a small business owner. But doing taxes? Not so much.
A smooth filing process depends on excellent bookkeeping, a qualified tax advisor, and some general knowledge on the subject. Utilize this guide as a jumping off point, then watch our free, on-demand webinar on general operations and bookkeeping!
Tips for Efficient Bookkeeping
First and foremost, use a separate checking account and credit card for business expenses. This simplifies bookkeeping because you don’t have to filter through transactions trying to figure out what was for the business and what was a family grocery trip.
Secondly, figure out a system and keep it updated. While old school paper bookkeeping is an option, embracing cloud-based software has many benefits including backup cloud storage. No more missing records!
Update income and expenses monthly, at a minimum. Then, complete a quarterly review to help you spot trends or areas of opportunity, like a high-selling product you could put more marketing budget behind. You’ll thank yourself for staying on top of things when tax time rolls around, as you’ll need to review the books when calculating deductions (more on this later!).
Lastly, keep hard copies or digital records for each business transaction. This includes bank records, credit card statements, receipts, and more. Records ranging from the past three years to forever may be required depending on the structure of your business and tax circumstances.
Learn more about record keeping from the IRS. Or, see how your business’s structure affects ownership and tax requirements.
What You Should Know About Business Expenses
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is common and accepted in your trade or business (e.g. an oven for a bakery). A necessary expense is helpful and appropriate for your trade or business, like the costs associated with distributing a newsletter. Note an expense does not have to be indispensable to be considered necessary – in other words, it doesn’t have to be something your operation hinges on, just helpful and appropriate.
Keeping an eye on the books helps you identify issues like bounced checks, outstanding invoices, and errors. You can always hire a professional bookkeeper if the process is overwhelming or you don’t have the time to commit to it. Have more questions pertaining to your small business? Join us on your schedule for General Operations and Bookkeeping, a free, on-demand webinar hosted by General Electric Credit Union (GECU) Business Services in collaboration with Bosch Tax Services! Not a GECU member yet? No problem – you can still attend the webinar.
Once you’re ready to join the credit union, you can open an account online in minutes! Eligibility is simple. You just have to live, work, worship, or go to school in Greater Cincinnati. Review our Membership and Eligibility page to learn more and discover the many ways joining GECU will benefit both you and your business.
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