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Preparing for your Business's Tax Return!

Posted by Admin Posted on Dec 05 2017

Whether it was your first year running a business or you’re a seasoned vet, preparing documentation to have your business tax return completed is never fun. Some may have been extremely organized throughout the year, but the reality is that most of us are consumed by the daily activities our company requires. In either case, it’s best to know what your accountant needs from you ahead of time, to avoid the back and forth during “busy season.”

Think about your financial statements, both your balance sheet and income statement in particular; your accountant needs to understand (and confirm) the details of these reports. For example, if your balance sheet states that the business had $1,000 in cash as of December 31, 2017, your accountant would expect to verify that amount with statements from the financial institution holding those funds.

In another instance, take your Fixed Assets (vehicles, buildings, machinery, etc.); if the balance of your Fixed Assets increased $10,000 during the year, your accountant needs to verify the activity that took place. Information such as the purchases made during the year can be extremely important to a business’s tax return, and ultimately to your taxable income.

This exercise isn’t just true with Cash and Fixed Assets, and the preparation of these documents for tax prep isn’t the only advantage! When reviewing your company’s financials at year-end, a lot can be uncovered – surprising results, areas of improvement, or perhaps even input errors. Many accounting software programs, or even excel, have the ability to look at the $ and % change of each account over a time period.

Let’s say you are reviewing your 2017 profit & loss and comparing it to 2016 – maybe there’s a large variance year over year in a fairly predictable expense account. This leads to further investigation, which leads to the finding of a misclassified check that was paid back in February! The point is that reviewing your financial statements not only helps you prepare for what your accountant is going to request, but it also gives you the business owner a chance to reflect on the financial results from a year of hard work!  

Here is a list of some common documentation items that business owners should provide to their accountant come tax time:

   -   Bank Statements

   -   Inventory list (as of 12/31 of the current tax year)

   -   Fixed Asset purchases (vehicles, machinery, equipment, etc.)

   -   Depreciation schedules (if you are switching accountants, just ask your prior accountant for a copy)

   -   Credit Card Statements

   -   Loan Statements

   -   Payroll Reports

   -   Income allocations per state

   -   Estimated Tax Payments you made throughout the year

   -   1099s 

Of course, there may be more or less depending on the complexity of your business. In any case, being prepared will always streamline the process! We at Sturgill & Associates look forward to making sure our clients are maximizing their tax efficiency and minimizing their tax liability this upcoming tax season! Call us today to discuss a projection of what your tax return will look like this year!

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