6 Steps On How to Be Prepared For the Tax Season

There are several steps you need to take for you to be fully prepared for the tax season. When it comes to tax, there are different stages involved. For example, you will need to have your books of accounting in order. A chartered professional accountant can help you. You can visit http://www.bbsaccounting.ca/ where you will be able to access highly qualified professional in Toronto who will offer you the best accounting services. In order to be prepared for the upcoming tax season you will need to follow these steps:

1. Familiarize Yourself with Tax Forms 

You need the right form for you to fill out the necessary tax information. The tax form you need will depend on the type of enterprise you are in. If you are the sole proprietor you will need forms which are specifically designed for sole proprietors. There are also different forms, which you will need to fill if your business is incorporated or a partnership.

2. Gather All the Financial Documents to Complete Your Return

You need all financial documents for your tax filing to be completed and correct. Some of the common materials you will need for your business include the following:

  • Bank statements
  • Payroll documents
  • Statements for business credit cards and personal credit cards
  • Last year’s business tax return
  • Accounting documents
  • Partnership agreements
  • Depreciation schedules

It is necessary for you to have all the documents so that your tax filling process can run smoothly.

3. Make a List of Income and Expenses

All of the income and expenditures you encounter in your business should be thoroughly accounted for. Some of the items you need include:

  • Gross receipts
  • Sales records
  • Checking and saving account interest (Form 1099-INT)
  • Returns and allowances
  • Unclassified income
  • Some of the expenses which must be accounted for in your tax forms include the following:
  • Employee wages
  • Office mortgage or rent
  • Fees paid to professionals such as your accountant
  • Insurance premiums
  • Payment to contractors (Form 1099-MISC or 1096)
  • Advertising
  • Transportation and travel
  • Computers and internet fees
  • Phones and communication devices
  • Office supplies and equipment

4. Examine Your Deductions

Deductions can be similar but not identical to expenses in your business. All types of businesses are allowed to deduct ordinary as well as necessary expenses. You can deduct any expense provided you prove it is relevant. Small businesses can access deductions such as supplies, furniture, software, set up costs and employee reimbursements. Other key deductions include insurance; you should be careful, if you interpret the deductions incorrectly, you risk an audit, which will lead to tax penalties. You should hire a tax accountant for you to avoid these types penalties as many can be crippling for a business.

5. Keep financial records

You should ensure your financial records are current and up to date for you to make the taxation process easy. You should maintain the tax records for at least three years after filing your tax returns. Adopt the latest technology because it will make your financial record keeping easy.

6. Ask for Additional Time if you are behind schedule

If you have not created all the documents required for your tax filing, you can ask for an exertion so that you will have all the issues in your business captured well. Always ensure you work within the extension if it is allowed. This will help you to avoid penalties.