There’s no better solution than thoughtful preplanning and a bookkeeping routine that keeps you current throughout the year.

There are two kinds of vacation travelers. The traveler that starts making preparations far in advance. The night before their vacation starts, the only thing they have to concentrate on is restful sleep. Then there are those who make little or no preparation at all. An hour before it’s time for the drive to the airport, they’re scrambling wildly from room to room in search of what goes in the suitcase.

Where’s that white shirt? Good grief, it’s still at the cleaner. What happened to the bottle of suntan lotion? That’s right, I left it behind on the last vacation. Shouldn’t the shuttle have called me to confirm the pickup time already? OMG, forgot to actually make the appointment!

Many small businesses approach the appointment with their CPA in the same fashion. Guess which group makes out better?

Build a routine and be prepared

Even small business owners who are sticklers when it comes to tax preparation can find the work makes them wish they were heading to the beach, rather than the CPA. There’s no better solution than thoughtful pre-planning and a bookkeeping routine that keeps you current throughout the year.

If, however, you find yourself to be more closely related to the “where’s my suntan lotion” type of traveler, you’ll find this small business tax prep checklist handy.

Spend some time with your bookkeeper

Wouldn’t it be great if your bookkeeper could just go ahead and do your taxes? Some do, but most prefer to leave that to specialized professionals. Even so, your bookkeeper is likely to be your most valuable resource for tax prep.

Psychic ability is not one of their job prerequisites, yet your bookkeeper is going to know the answer to most of the questions your CPA will ask you as they prepare your taxes. Block ample time on your calendar well in advance of your tax preparation appointment. Walk through the books together and get comfortable with what you see. Reconcile any surprises. Answer each other’s’ questions.

Prepping for the prep

In the spirit of sufficient preparation, let’s go back even a bit further – prior to the meeting scheduled with your bookkeeper. If you expect them to arm you with the information and documentation you’ll need for a CPA to prepare your taxes, your bookkeeper should expect that you’ve provided them with all the necessary information to make those numbers ready. Here’s what should already be in their hands:

  • All out-of-pocket expenses. The IRS doesn’t have issues with using personal funds for business expenses, but if you want to claim it as a legitimate tax deduction, you do need to identify and document them. You can wait until the end of the year and hope you remember all the reimbursable purchases. Or, you can review the statements monthly and save a few brain cells.
  • You’ll also want to make sure to identify and properly record personal purchases charged to your small business accounts. You don’t want them to be improperly deducted as a business expense.
  • The IRS says that meals related to your small business operation are either 50% or 100% deductible. Take the time to identify the purpose of each expense so your CPA can accurately report it.
  • Wouldn’t it be great if your vehicle could just automatically keep track of business miles? Okay, there’s an app for that. However, if you plan to deduct the standard mileage rate, you must have a log. Be sure you’ve kept it updated and that it is ready to present to your CPA.
  • Confirm your access to the company’s bank statements. Your CPA appreciates the ability to review these bank documents before they prepare your taxes. Bank balances should match balance sheets.
  • Employee stock options or a partner leaving the business changes equity and can cause complex tax consequences. It’s crucial to bring these to the attention of your CPA when they’re preparing your return.
  • Are all 1099s accounted for? If your small business is service-based, you can end up with a lot of these forms—and remember that the IRS gets a copy, too. Will their collection match yours? This must include the 1099-K forms you get from payment processing and credit card companies.
  • And, likewise, did you issue all of the appropriate 1099 forms to all non-corporate service providers to whom you paid more than $600 the previous year?
  • If it costs more than $500 and will be used by your small business for more than a year, you’ve purchased an asset. You’ll need copies of these purchase receipts, so they can be depreciated, rather than deducted as a business expense.

Use this checklist to prepare for the preparatory meeting you’ll have with your bookkeeper. You’ll find that the time you set aside for meeting will be time well spent. You’ll be prepped for your meeting with the CPA.

And don’t forget to take that white shirt to the cleaner.

If you’re interested in learning more about tax compliance for business owners in 2018, you can read more on our blog.

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