No one wants to think about their tax return when tax season is months away. But, when your filing deadline is getting closer, lack of preparation can leave you disorganized, slow down the filing process, and even increase the possibility of errors. Better recordkeeping is a great way to improve your business’s tax strategy and make filing faster and easier. Adopt these year-round habits to stay prepared for tax time:
- Stay organized
Businesses accumulate piles of tax-related documents over the course of a year. Whether they’re paper or digital, the high volume of records can make locating the right document a lengthy chore. Create a logical filing system and always follow it. Not only will this save precious time during tax prep, it can help you and your staff boost efficiency year-round.
- Know what to save
Discarding unneeded documents is a great way to reduce clutter and stay organized, but always consider the value of each document before sending it to the shredder. Because many records provide evidence of an “action, expense, or event” relevant to your tax return, the IRS tells filers to keep any records that could be needed to fix a discrepancy or complete an audit.
- Keep track of property documents
If your business owns real estate, having complete information about your property is vital. Keep a yearly file (or multiple files) for documents connected to your commercial mortgage, real estate taxes, and other property expenses. Also, hold on to documents related to any previously owned property for at least seven years from its disposition. If you acquired your current real estate through a tax-deferred, like-kind exchange, keep the documents for both your current and previous properties.
- Digitize your records
Digitizing your documents and storing them remotely through a cloud service is a great way to make records readily accessible while protecting them in the event of a fire or flood. Retroactively scanning and organizing many years of documents is certainly time-consuming, but if you and your staff routinely scan and file documents as they’re received, the process can become fast and simple. The IRS has accepted digital images of receipts since the 90s, so this shouldn’t affect your filing, but make sure you can provide a hard copy of a document if necessary.
- Meet with your tax professional
Even if tax season is far away, meeting with your tax advisor now is an important way to stay prepared and finetune your tax strategy. This is a great opportunity to talk about your goals and discuss how your business performance or expenditures could affect next year’s return. Consulting with your advisor outside of the busy season is also a great way to get some extra attention and even find opportunities to save on next year’s taxes.
The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.