Finding the right accountant for your small business taxes is an important decision that extends beyond tax season. The right accountant can help you throughout the year to make sure that your business is ahead of the game when it does come time to file. Depending on the financial company you choose to work with and the services they provide, much of the information they need to ensure your taxes are ready to file they may already have. If you are working with a CPA for the first time, or if they do not manage your financials throughout the year, it is important to make sure they have all the documents they need to bring you the best return or lowest payment due that is possible. Though businesses and their tax preparation needs are unique, there are some basic things that a CPA will need to do the job right.
It may sound obvious, but in order to complete your taxes, a CPA is going to need financial statements from your company. There are several documents that are helpful, but the most important is an income statement. Because the IRS is taxing you based on your income, they need an accurate record of what your company brought in over the year. Ideally, your income will have been tracked all year long and a single document called an income statement will clearly list the type and amount of all income you’ve received. Most employers and even clients will send your company tax forms such as W-2’s and 1099’s that document the income you received from them. These documents are also important to provide so the accountant can ensure the amounts match and there are no errors. Keeping accurate records and having your financial forms and documents organized can help the CPA to prepare your taxes in less time, and will likely save you money on their services.
A balance sheet is also an important tax document to provide the CPA. Sometimes called a statement of financial position, the balance sheet will give a picture of where your company stands financially at a specific moment in time. The balance sheet used for taxes is best when prepared as of December 31st. This will reflect all financial transactions for the year up to that date. It includes both what your company owns and what it owes to determine the worth of the company at that particular moment in time.
Documents of Proof
You may have kept the receipts and invoices for your expenses in neatly organized and labeled folders, or you may have a big messy box that you tossed them into all year. Either way, you’ll want to bring proof of your expenses in with you to the CPA. Make sure that you check to make sure that all receipts and invoices for your expenses are provided; it can be easy to forget ones that were emailed to you for example. Having these can allow the CPA to ensure there are no errors on your statements, and will provide proof should you be selected for an IRS audit. Include receipts and invoices for any expenses including business expenses, education expenses (when related to the business), interest paid, charitable contributions, taxes paid, and any other incurred business related expenses.
In the unfortunate event that your business suffered a major loss due to a disaster such as a fire or flood, or you were victim of a theft, provide proof of the loss to your CPA as well. Tragedy is provided some leniency by the government and the more proof you can provide, the better your chances of obtaining a sizeable deduction to help offset the damage the event caused.
Companies will often have capital assets and these also need to be included in your tax preparation. Capital assets refer to those things that a business owns to increase profitability, but however are not generally sold easily in general business operations. Capital assets include items including land, buildings, machinery, equipment, and others. Typically, they are the things needed for your business to operate and are generally only liquidated when it is absolutely necessary. If however, you sold or disposed of any capital assets, or if you purchased new ones, you must include the transactions on your taxes. Certain accounting software programs are often able to provide this information easily for you. A list of all activity including the description or nature of the assets should be enough for your CPA to work with.
Personal vs. Business Use
For many small businesses, the use of personal property is used for business purposes. Most commonly, the owner’s home or vehicle can be included on the tax return of the business. For home offices, you can typically claim a portion of your home as business expense when the home is your sole place of business or if you regularly meet customers or clients there. A percentage of items including utilities, maintenance, home insurance, mortgage interest, and rent can be determined and used. The amount can be calculated by dividing the total square footage of your office area by the livable square footage of your home, or dividing the number of rooms used by the business from the total number of rooms in the home. In either case, you multiply your total home expenses by the percentage that was determined. Depending on the CPA, you may need to include the actual receipts or a summary of those total expenses. Fortunately, a new IRS policy has made finding the home-office deduction much easier. The use of your personal vehicle for your business can also be included as a deduction in some cases. In order to take advantage of this, you will need to have kept a vehicle log that tracks the business mileage. This log will be needed by your CPA to determine your available deduction.
Professional Tax Preparation with Landwehr Financial Solutions
The professionals at Landwehr Financial Services can be a great help in navigating your year-end tax preparation. Our holistic approach ensures that we will take the time needed to truly understand your situation and make your accounting concerns disappear. Contact us today to learn more about our services and experience first-hand the level of care we give to all our clients in the St. Cloud MN area. We are happy to discuss your tax needs, as well as any other accounting services you require.