It’s that time of year again, when flowers begin to bloom and accountants work overtime to get tax returns finished before a looming deadline.
With April 18 just a few days away, you should have already filed your business taxes, and hopefully your personal returns as well. Still pulling your hair out, frantically searching for records and receipts? Here’s a little advice to make next spring a lot less painful for you:
Get and keep your records in order, and your future tax seasons will go much more smoothly. Not only will you have everything ready for a simpler filing process, you’ll likely save on tax expenditures, including fees, missed deductions and penalties.
Our friends at the IRS point out multiple tax benefits of good recordkeeping on their website. Those benefits include:
- Monitoring the progress of your business
- Preparing accurate financial statements, such as income (profit and loss) statements and balance sheets.
- Identifying the source of your receipts
- Keeping track of deductible expenses
- And of course, preparing your tax return
If the IRS does want to examine any of your tax returns (also known as the dreaded tax audit), you may be asked to explain items you’ve reported. It will certainly help matters for you if you have a complete set of records to show the auditors.
For personal taxes, I like the “four shoebox” method, which means keeping the past three years’ worth of records in three corresponding shoeboxes. The fourth shoebox should be empty, ready to house the current year’s records as you accumulate them. Once you file your return next year, you can dispose of the records in the oldest shoebox (because you can only be audited for the past three years’ worth of returns). Then the newly empty box serves as the new tax year’s record holder. Sounds low-tech and simple, but it works.
I know it isn’t always easy to get your ducks in a row when it comes to business records — during tax season, and all year long. Want to get some help achieving pain-free tax returns in 2012? Learn more about how you can save time with offsite document storage and imaging, as well control business records management costs.
