Did getting all your papers together for your accountant feel like frenetic chaos in the middle of a hurricane? Do you want to make next year’s tax season a gentle breeze? We get it. Many of our clients feel overwhelmed come tax season. Whether you’re grabbing random receipts stored in grocery bags, hunting for lost files, or even realizing your expensive accounting software hasn’t been updated in months… Getting ready to file your taxes can feel insurmountable.

It doesn’t have to be that hard. Next year can be easy, we promise. Here are some simple ways you can make your bookkeeping more organized for the next tax season.

Personal Information for Your Business Taxes

Our first one is pretty easy. To complete your business taxes, we’ll need some very basic personal details: legal name, current address, and social security number. And we also need your Employer Identification Number (EIN), if you have one.

Your Last Tax Return Helps Make the Next One Easier

Bring in your business’ most recent tax return. We use last year’s taxes to get a better view of your business for this year, including what deductions you have (or haven’t) taken advantage of, without needing to keep you on the phone.

Creating a digital copy and saving it is a great way to not forget which dusty file folder it’s hiding in. If you’re already one of Monarch CPA’s clients, we’ll have it on file.

The Financial Reports You Need for Your Business Taxes

Your business’ financial reports include a lot of stuff: last year’s corporate tax return, any partnership agreements or change of ownership information, and details on your bank accounts. Additionally, we need your Profit & Loss Report (or Income Statement), Balance Sheet (or Statement of Financial Position), and Statement of Cash Flows.

If you use accounting software like QuickBooks, you can print out all these documents on demand.

Know What IRS Forms You Need for Your Taxes

Your business type determines which tax forms are needed. They vary depending upon whether you operate as a Freelancer/Sole Proprietor, Partnership, S Corporation, Limited Liability Company (LLC), or Single Member Limited Liability Corporation. To discover which forms you need, visit the IRS’s page on Forms, Instructions & Publications.

When you work with Monarch CPA, you don’t have to figure any of that out by yourself. We know which forms you need and will do the heavy lifting for you.

Record Your Business Assets

In the most basic sense, anything that helps you work (even pen and paper.) can be viewed as an asset. Assets can be physical goods (real estate, computers, furniture, vehicles), or other things like software and intellectual property. To keep an accurate record of your business’ assets, you’ll want to keep your receipts, documents, or related reports and bring them in.

If you’ve been entering it all into your accounting software, there’s a report you can print out with everything you need. However, if you don’t use accounting software, we recommend you put your asset documentation in one designated file folder (physical or digital) to make them easy to find next time around.

Loan Records and Agreements

Records from loan payments, interest gained, and even the agreements for any new loans you’ve acquired are important. And if your business has gotten any COVID funds from loan or grant programs (i.e. Paycheck Protection Program, the Economic Injury Disaster Loan, or the EIDL Advance) the use of these funds for eligible expenses can be written off as deductions.

To help make these documents easy to find, we recommend keeping track of all your related receipts, invoices, and records in a dedicated folder.

Income & Expense Bookkeeping

Unsurprisingly, we need to know about all your business’ earned income for the year. Whether it’s from the sale of products and services, rents, or something else, you need documentation of all the money coming into your business. How you do this will depend upon your business type, but you can start with bank deposits, invoices, and cash register tapes. You may also look to accounts payable and receivable, payroll records, tax filing, W2, and 1099 forms, or even petty cash slips for small payments.

You may be eligible for deductions based on how you spent your business money. You can count almost anything that can be considered a reasonable expense for generating revenue.
Administrative costs, travel expenses, employee benefits, dedicated home office space, etc. can all help reduce how much you owe. To track this information we recommend keeping copies of your mileage logs, receipts, bills, bank statements, charitable donations, credit card statements, mortgage interest, and property taxes.

Your bookkeeping software can often help track most of this if you’ve kept your entries up to date. Still, just in case of a data crash, it’s always a good idea to keep copies safely organized in a physical or digital file.

Payroll Information for your Taxes

If you are an employer, you need to keep track of all the payroll-related documents for each of your employees. Everything that relates to your employee compensation needs to be tracked. Wages, taxes, benefits, or general policies- it’s all important. Keep good records on total compensation, pay rates, tax deductions, hours worked, benefit contributions, and more. Bring copies of W-2s, W-3s, and 1099-MISCs along with health insurance records.

While some of this information will be tracked by your accounting software, much of it will be separate. We recommend regularly updating your files and backups so you know where all the information is stored when the next tax season rolls around.

Tracking Business Inventory for Taxes

If your business sells a product or makes goods, you must keep complete records of your inventory. While you won’t be taxed on it directly, it is used to determine the cost of goods sold (COGS). Included in this is what has (and has not yet) been sold over the year. Whether the item you hold is for sale or something you will use to create income-producing goods, all of it must be tracked.

Many different computer programs can be used to help you track your inventory, depending upon your industry. That said, it can often work perfectly well to track your inventory in Excel. Just remember to regularly update it.

Accounting for Your Business Investments

If your business has bought or sold stocks, or earned interest or dividends, it needs to be recorded for your taxes. You should get all of this information in 1099 forms from your broker. You’ll want to watch out for 1099-INT for interest, 1099-DIV for dividends, and 1099-B for sales, though your broker may combine all the different reports into one.

Investments you need to track don’t stop there. If you, or any business partners, make investments that are put into or pulled from your company during the year, we’ll need that information. This includes payments to yourself through business withdrawals, not just for investment purposes.

If you need records from your investments, you can get this from your broker directly. And, if you’ve been keeping excellent records in your bookkeeping software, you’ll have a good accounting of your withdrawals.

Next Year’s Taxes Can Be Easy

We hope that we’ve taken some of the dread out of next year’s taxes. This list may sound like a lot but it all comes down to one simple thing: stay organized. Starting good habits today will indeed make it a breeze to find everything you need during the next tax season.

Make sure everyone who touches your records is on the same page. It can also help to set a schedule for updating your files on a regular basis. Think of it like doing a deep spring clean and then taking small steps every day to maintain it. And remember, if you go digital on your record-keeping, you’ll reduce clutter and be able to quickly send us records via e-mail.

Do you feel more capable of getting ready for next year’s taxes? Or, do you still feel overwhelmed and like you want a vacation from it all? Not to worry, we’re here to help. Whether you need help developing systems to track your data, a boost for learning QuickBooks, or if you’ve got everything handled and just need us to file the taxes, Monarch CPA is here for you. Contact Us to help you reach your goals.