tax returns file folder in a file cabinet

6 Ways to Manage Tax Records More Efficient

Are you keeping your business tax records organized? Here are 6 tips for doing it right.

Key takeaways:

  • Six tips for better records management:
    1. Keep tax documents together
    2. Go digital
    3. Get ahead of deadlines
    4. Use one account or card for expenses
    5. Put a weekly plan in place
    6. Know which documents to keep and for how long

Tax preparation isn’t just something to do in the spring—it should be an ongoing, year-round process. A business has many financials to manage and track, and without a solid record-keeping strategy, the numbers and documents can get out of hand quickly. Both tax management and financial forecasting require preparing regular statements to get a good idea of where the business stands each year.

So, what records do you need to keep? How do you stay organized? What steps should you take year-round to keep things in order? These tips will get you moving in the right direction:

1. Keep tax documents together

Taxes are one crucial reason to implement a solid record-keeping system. When you’re working with an accountant, you’ll have a much faster and more successful experience if you already have all applicable documentation ready to go. 

This means keeping quarterly financial reports, expense receipts, deductions, income statements, and other business tax records together so you’re not scrambling to deliver everything to your CPA.

2. Go digital

Gone are the days when you had to store all receipts in a box under your desk. Most vendors and businesses will send digital copies, so use that option where possible. It’s also advisable to leverage a platform like QuickBooks that automatically tracks expenses as they come out of your accounts. 

These processes help you find everything with a simple search and store all information in a cloud folder for easy access. Going digital not only helps prevent misplaced documents but also helps your office reduce its carbon footprint and avoid digging through reams of paper.

3. Get ahead of deadlines

Tax deadlines abound for business owners, so create a schedule to help you stay on track. You have to pay estimated quarterly tax and may need to issue employee tax forms, like W-2s and 1099s. These documents must include accurate data, including contact and personal information and income and benefits earned, so don’t leave them to the last minute.

Additionally, don’t put off starting an annual tax return until April. Schedule time with an accountant early in the year, so you’re not scrambling to get it done or paying higher fees for rush services. 

4. Use one account or card for expenses

Listing all expenses on a tax return can be the most time-consuming part of the process. You may be wasting a lot of time browsing through statements to find business-related purchases, and mistakes happen more frequently that way. 

Make it easier on yourself and your financial professionals by using one account or credit card for business expenses. This keeps these purchases separate from personal expenses and helps you add everything up quickly when the time comes.

You can even link this account to QuickBooks or a similar dashboard so that only the expenses that appear will be compared with the business’s income. This practice also enables automatic income, expense, and cash flow reports that keep tabs on business performance.

5. Put a weekly plan in place

All of these moving parts require consistent attention. Try setting aside thirty minutes to an hour every week to make sure you’ve saved income and expense records. Pay attention to upcoming deadlines and reporting timelines. Schedule appointments with your accountant or business strategist if you have questions or need assistance.

Dedicating this time each week to finances and record-keeping helps you stay ahead of what’s coming and keeps the business organized.

6. Know which documents to keep and for how long

After filing a tax return each year, it may be tempting to get rid of all those documents. But the best practice is to keep tax returns and the documentation used to complete them somewhere safe for at least three years after the date you filed.

Why? Because the IRS statute of limitations is three years, meaning you have that amount of time to claim a refund. The IRS also has three years to go back and try to validate your tax return information. That said, if you have employees, the best practice is to keep employment tax records for at least four years. Make sure to back up all these documents in a digital format that is safe and secure.

Get professional strategic help

Just because you know these best practices doesn’t mean you always have the means to stay on top of them. When you need a little help determining which documents are crucial and understanding your tax obligations, work with the team at Provident CPA and Business Advisors. 

We specialize in minimizing taxes for business owners and assist with growth and profit improvement, a proactive management system, business advice and strategy, and much more. 

Contact Provident CPA and Business Advisors to learn more about our services.

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