The sooner you get your taxes done, the sooner you can cross them off your list and stop worrying about them. Here are a few things you need to do in order to prepare your books for doing taxes when you are a sole proprietor.
Decide Who Is Going To Do Your Taxes
First off, you should decide who is going to do your taxes. Figure out if you want to do your taxes yourself or if you want an accountant or bookkeeping service to do your taxes for you.
If you want to outsource your taxes, contact the individual or company that you want to use and set up an appointment to start working on your taxes. Remember, tax professionals work with hundreds or even thousands of clients during a short time period every year. The sooner you schedule and set up an appointment, the sooner the tax professional you hire will able to get started on your taxes. Plus, once you set a meeting, you will also have a deadline set for getting your books ready as well.
Gather Up All Your Receipts And Account Statements
If you are behind on your bookkeeping, now is the time to gather up all of your receipts for the last year. Then sit down with your receipts and get to work updating and entering all of your business transactions into your accounting system so you can get an accurate reading on your expenses and earnings for the year.
Make sure you also get out all of your credit card and bank account statements and enter them into your booking system as well. Ideally, you should do this every month. Now is a great time to catch up and check your work.
As a sole proprietor, you can qualify for a variety of deductions. However, you can only take these deductions if you have kept track of everything throughout the year. Set aside some time to gather and compile all of your deductions. Here are some common deductions and items you need to get ready in order to do your taxes.
- Mileage Log: If you drive for business, make sure that you have entered all of your business driving trips into your mileage log. Add up the totals for each individual month, and then add all of the months together to figure out your total mileage deduction for the year.
- Major Purchase List: If you made major purchases throughout the year, go through your receipts and bookkeeping software and add them up. These can all qualify as investments in assets for tax purposes. Items such as furniture, software and computers should all make your major purchase list.
- Health Insurance Premiums: As a sole proprietor, you have to pay for your own health insurance. You can deduct your health insurance premiums for the year from your taxes. So find all of those statements and add them up as well.
- Meals And Entertainment Expenses: If you do not have a separate category for meals and entertainment expenses in your booking already, go back through your receipts for the year and calculate these expenses separately.
- Home Office Expenses: If you qualify for a home office deduction, you will need to figure out what your expenses were for your home, and how much of those you can deduct. Generally, you can deduct the percentage of your home that you use from your home expenses such as mortgage and/or rent, property taxes and utilities.
- Tax Payments: If you made tax payments throughout the year, you will want to make sure you have accurate records of when you paid and how much you paid.
Gathering all of this information will make it much easier for you or your accountant doing your taxes this year. Make sure you set aside a few days in January to get your books and deduction information in order, so you are able to file your taxes on time this year. For more information and tips, contact a local tax preparation company, like Knowledge Integration Solutions.Share