Home Business or Small Business Tips
Starting and running a successful small business can be a daunting task in itself. Managing the tax requirements is an equally daunting challenge and one best left to an expert. Does your limited time require someone else to manage your daily accounting? Maybe you can manage the day-to-day, you just require a tax professional to file the proper forms on your company’s behalf? Look no further, Baker’s Tax and Accounting Services has been guiding small businesses in its accounting and tax filing needs for over 20 years and we can also serve your company’s Payroll needs. Here are a few tips to think about if your are starting or have started a small business or home business.
What you need if you just started a home-based or small business.
If you just started a home-based business last year, you will need to bring in an itemized list of income and expenses. This should include a total of your utility expenses, your cell phone bill and your mortgage insurance. If you rent, include that total for the year. If you are not sure of all the expenses you can claim look on the Schedule C at: IRS.gov
For car expenses you will get a greater tax deduction by using mileage. You can use map quest to help you calculate this expense. If you have purchased a car within the last 5 years we can depreciate the car as an additional expense by using the date and the amount of purchase.
For those of you who have rental properties, please provide us with the income and an itemized list of your expenses. If you have multiple properties please make sure your itemized list of expenses is per property. Also please make sure your mortgage interest statements have the address of your property listed or written on the statement so that we can correctly identify and complete your tax return. We really appreciate your help with this!
Why should I keep records?Everyone in business must keep records. Keeping good records is very important to your business. Good records will help you do the following:
Monitor the progress of your business
You need to keep good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success.
Prepare your financial statements
You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business.
An income statement shows the income and expenses of the business for a given period of time.
A balance sheet shows the assets, liabilities, and your equity in the business on a given date.
Identify source of receipts
You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from nonbusiness receipts and taxable from nontaxable income.
Keep track of deductible expenses
You may forget expenses when you prepare your tax return, unless you record them when they occur.
Prepare your tax returns
You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business and prepare your financial statement.
Support items reported on tax returns
You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.
What records should I keep?
- Gross Receipts - Transportation - Purchases Expenses - Assets Employment Taxes - Travel - Entertainment and Gift Expenses
How Should I record my records?
PRIMARY SECONDARY - Journals - Business Check book - Legends - Daily Summary of Cash Receipts - Monthly Summary of Cash Receipts - Depreciation Worksheet - Employee Compensation Records