How to Get Your Books Ready for Tax Season
By: Accounting Partner
Tags: Contract Cfo, Taxes, Small Business, Finance, Accounting

The tax season can be daunting for some people. All the rush of hunting documents without an idea can be a lot to deal with.

Bookkeeping is a lot of work where one needs to save all the documents for last minute checking and calculation. Starting with tax preparation before the deadline only makes work-life stressful especially when you are the owner.

If you want to take Tax services Canada seriously by avoiding stress factors, here is our guide to getting your business ready for the tax season.

Keep the bookkeeping in an orderly manner

Updated books help in filing taxes. You can easily screw them up by losing some file or document, but avoiding these mistakes can be simple.

Make sure to keep records and transactions in a general ledger categorized as consistently and accurately as you can.

● Balance the books

If you are using double-entry accounting, be sure to balance the books. The sum of all the debts must be equal to the sum of all the credits.

In case you are using Small Business Bookkeeping program or application, the task becomes pretty simple. Everything will be done automatically in a small time. If you are doing anything by hand in an Excel sheet, do it with patience and a lot of dedication.

● Reconcile the bank accounts

Reconcile means that your book must match with the bank records. You save a lot of your time by doing this. Your bookkeeping is not done until the bank agrees to the records of your company.

● Separating business with personal expenses

Compartmentalization is very important for businesses. Otherwise in the tax season you may be facing the consequences. Sorting out the personal and business expenses is time-consuming if the account and the transaction is the same for both. It is advised to keep a business account separately to record the business transaction easily at the end of the fiscal year.

● Talk to professionals

Having a one-man army is commendable! You save money but the time and stress cannot be tracked. Therefore, take professional help from an Accounting Partner. The person must have experience in Bookkeeping services and the finance world. A tax professional or a CPA can easily look after your books.

Organize the paperwork and deductions

Tax is all about receipts, payments, loans, and money. When money is involved, only words are never a justification. You must have written documents as valid proof of your argument.

Once you find a solution to the above problems, it is better to keep track of the expenses.

● Say ‘NO’ to papers

Business records for the last three years cannot be kept on written papers. You will be having a huge number of receipts, payroll records, and invoices in the long span. The papers might catch dust, wear off with damage too.

It is better to use applications for Small Business Accounting Services. They usually have no storage limitations or if they do it is abundant to store .exe files over three years. Go for cloud storage. You can also use a receipt app to make the task easier.

Keep the Tax Money separate

Whatever money you owe in taxes, keeping it separated will relieve you from the pain at the end of the year.

● The 30% Rule

Whenever you will be unsure about the amount of money you owe in federal taxes, keep a total of 30% money separated from the net amount. The middle-large scale businesses work in that manner. 30% is a fair amount as per experts’ recommendation.

● Choose a feasible method to save money

Other than these three methods, you can hire a professional Part Time Controller to take note of bookkeeping during Tax season.

⮚ The Monthly Method

Make a sum of the total profit money of the year and divide it by the number of months. This is the average monthly income amount you have, now, find 30% of that amount. The result you get is the amount you will be separating for the taxes.

⮚ The per-payment method

Here, you separate 30% of the payment into the business account every time you receive a payment from the customer. If you are a beginner in business, it is a great way to save money. By the end of the year, you will count the total sum and save a lot from tax money too.

⮚ The Yearly Method

Here, you calculate the previous year’s business income and divide it by four (Usually, the yearly method is broken down into four halves at a three-month interval). Now, 30% of this amount is what you will be saving for estimated payments.

● Separate the tax money into another account

The dip in tax savings can easily be avoided by preparing in advance. Keep your everyday finances in a separate business account. Firstly, make two accounts for personal and business purposes. Now, make another account to separate the taxation stuff.

If the multiple account thing gets too hectic for you, appoint the Part Time CFO Services in Canada. CFOs are the financial backbone of a business. Having a CFO in your finance team will always benefit you.

Wrapping Up

These were some of the basic tips to maintain updated bookkeeping in Tax Season. You can either follow our advice genuinely or hire a Contract CFO to get the job done!