Friday, September 22, 2023

How To Organize Tax Documents For Accountant

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How to Organize Tax Documents, Paperwork, & Receipts (Part 7 of 10 Paper Clutter Series)

The first thing you will want to do is gather all of your tax documents, receipts, invoices, etc. into one place. I suggest using a large table like a dining room table.

If you own a business, go ahead and make two piles. One is for your personal tax documents and the other is for your business. If you have more than one business then create a separate pile for each entity.

Now using your IRS required document deadline, begin separating each of these piles . If you find any documents you are no longer required to keep, go ahead and shred these.

Below is an example of what these sorting piles may look like if you are required only to keep three years worth of documents and you own a couple of businesses.

Up next, we are going to further sort and organize each of the piles. I suggest starting with your personal taxes and start with the earliest year. So in the above example, I would start with the 2017 personal taxes pile, followed by 2018 personal taxes and so on.

Tax Organizing Resolutions For Small Businesses

No one enjoys tax time, not even accountants. Because business owners dont enjoy taxes, they tend to avoid the issue, procrastinate, and then make a last-minute dash to the filing finish line. You can alleviate the stress of scrambling to meet tax deadlines by preparing throughout the year. So, this year, make it your resolution to get your taxes organized and ready for tax season.

When In Doubt Seek Professional Tax Advice

I have had no problems using tax preparation software in the past TurboTax and are great options . But you may run into a tax situation that isnt clear.

I would rather err on the side of caution when it comes to the IRS and avoid paying late fees or penalties, especially now that my small business complicates my tax situation. Dont hesitate to reach out to a tax professional if your tax situation is unclear.

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How To Organize Tax Documents And Receipts

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Its never too late or too early to get your tax-related documents organized. This system isnt about looking pretty its about doing it right.

The first year my blog earnings passed the hobby level and turned into an actual full-time job, I had no idea how to organize tax documents. It took me over a week to fill out my return, and I swore Id figure out how to make doing my taxes easier. Now, almost a decade later, it only takes part of an afternoon to prepare my taxes, thanks to the document organization system that I set up.

Create A Custom Tax Document Organization Checklist

Looking for ways to stay organized for tax season? Or how ...

I dont know about you, but attempting to gather all of the different documents and bits of information I need in order to complete my tax forms is a royal pain. Yes?

Since doing my taxes is a once-a-year activity, I have a hard time remembering everything that I need. To make this process even more annoying, these documents arrive in your mailbox at various points throughout the tax season.

It requires constant vigilance to keep on top of it all.

This is one example of when creating a checklist can really save your bacon. My personal checklist serves as a reminder that Ive got to be on the lookout for a dividend statement for one of our investments, and a 1099 form from an obscure savings account that I forget we have.

Going back to that theme of everyones tax situation is different, Ive created a basic Tax Document Checklist for you to customize and use as a guide as you go hunting and gathering for those papers.

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Spend Time Reviewing Your Receipts Once A Month

We always recommend to our Members that they sit down for 30 minutes every month to review and categorize their receipts. This keeps things manageable as the year progresses and keeps you on top of your spending, so you dont miss out on any tax deductions.

Purchase an accordion folder every year to house all business receipts. These inexpensive folders are easy to obtain and allow you to organize your receipts by category and year, so finding a specific receipt is a snap in the future.

Tax Preparation Made Easy Tips For Organizing Your Tax Documents And Keeping Stellar Tax Records

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Heres the understatement of the day: the US Tax Code is complicated. I dont have any problem paying my share of taxes. But I do have a problem with the complexity of our tax system. Estimates of federal data put the collective time spent on complying with tax laws at 8.1 billion hours in 2016 , a large increase from the 6.1 billion hours in 2012. That is a lot of time to do your taxes!

Many of those 8.9 billion hours were from business tax returns. But personal taxes have become increasingly more difficult to navigate. Our own personal situations may further complicate our tax returns. Being in the military, owning a small business, working as a contractor or freelance worker, having large or complicated investment portfolios, etc.

Thankfully, most tax software programs are powerful enough to do the heavy lifting. But the responsibility still falls on us, as individuals, to ensure our tax returns are done properly.

I recently received a reader question from someone who wants to know how to keep track of their tax deductions and paperwork. Im not a tax expert, but as a small business owner and member of the Air National Guard, I have a fairly complicated tax situation.

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Resolution #: Issue W

The deadline to deliver tax forms to your employees and independent contractors is January 31. Complete year-end information isnt available until the first of the year, but you can begin to gather the information youll need to complete each form beforehand.

Towards the end of the year, youll want to verify basic, key information with each member of your staff.

For employees, verify:

  • Taxpayer Identification Number
  • Total Wages Paid

Youll need this information to prepare each W-2 and 1099 form, so having it ready to go on January 1 will make it easy to meet the deadline at the end of the month.

Myths About Business Tax Filings

How to Organize your Tax Documents

Many people believe they don’t need to file a return if they made less than $5,000 or if their business didn’t make a profit. Both cases are false. You still need to file regardless of the amount you made, even if it was a loss. In this case, you can use that amount to offset any other income. And if you made money, but less than $5,000, you may still be on the hook for Canada Pension Plan contributions the share you and your employees owe are calculated on your tax return.

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How To Save Money On Accountant’s Fees

Accountants get paid by the hour, so the harder you make their job, the more it will cost you. Fees vary based on the size of your business and how much depth your accountant or preparer may have to go through to complete your return. These fees can range from a few hundred dollars to thousands.

Here are some tips to cut down on your accounting bill:

And remember, having a tax professional prepare your income tax return isn’t costing you as much as you think when you see the bill. It’s a legitimate business expense!

Organize Your Tax Documents As You Receive Them

If you get an email with a tax document attached, save the document to the cloud. If there is tax information in the email, then print the email to PDF and save the PDF in the cloud.

If you get tax documents in the mail, you can either scan them to PDF with a scanner or you can download Scanner App on your iPhone or Android devoice. This allows you to take a picture of your paper tax document and scan it to PDF seamlessly. Then you can save the PDF file to your cloud.

If you have a rental property or own a small business, but are not using bookkeeping software or hiring a bookkeeper to handle your books, then we recommend you categorize transactions in Excel. At Black Sheep, we provide our clients Excel templates to enter in this data, and they provide us that data prior to preparing their tax return.

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How To Store Organize And Submit Your Tax Data To Your Cpa

Youve all heard the story of taxpayers who submit a shoebox full of receipts and a stack of paper 10 inches thick to their CPA at tax time. What you may not know is how the CPA reacts when they get this treasure trove of information. The CPAs heart rate goes up. Their eyes get very big and googly. And they may yell why in the world is this happening to me?

In all seriousness, CPAs appreciate clients who are organized and submit their documents in a timely manner. However, getting the data together for a tax return can be a daunting task, so here are a few tips to make the process easier.

When In Doubt Delegate

How to Organize Documents for Tax Time &  Avoid Tax Season ...

Running a business is a lot of work, and keeping track of every receipt adds even more work on top of it. When your company has grown to the point where its making multiple purchases a day, or tracking expenses is taking more than a few minutes out of your schedule, its time to delegate the job to a clerical employee. To do this effectively, set aside some time to teach your filing system to a clerk or administrative assistant. Schedule an office-wide meeting, or send out a memo, to let everybody know that receipts need to be dropped off with the designated person going forward.

Because youre trusting another person to file records that can have a major impact on your deductions or exclusions, be sure to check in from time to time and verify that all is well and the records are being kept the way you need them to be. As time passes and you get more comfortable with how your receipts are organized, your checks can get less and less frequent.

Organizing receipts is a time-consuming, but ultimately money-saving, affair. By getting into the habit of collecting, copying, and filing transaction records, you can be sure youre ready for both the innocuous request for information and the much-feared Notice of Reassessment from the CRA.

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Do You Have All Of Your Tax Documents

One thing you want to do is make sure you have all of the documents that you are supposed to have.

These days, some banks and organization put your documents online instead of sending you a paper statement in the mail.

So, it is up to you to go and download or print these documents out.

If you received income from any source but do not have a tax document for it you might need to follow up and see what is going on with that.

Use A Business Account And Credit Card

Its easy to lose track of cash transactions so its good practice to use a credit card or debit card to cross-check details with your paper receipts. Its a good idea to have a separate business account and credit card so you dont mix business expenses with those incurred for personal purposes.

As a bonus, if all transactions are business related, you can claim any fees associated with that card or account. For example, the annual fee on a points card, or the interest from a balance carried from one month to the next, can be claimed if the transactions are business related.

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Organize Receipts In A Filing Cabinettwice

Once you have a permanent record of the days transactions on nice, acid-free paper, youre ready to file it away. You want to do this twice: once for taxes and a second time for your own reference. In the first folder, which you can label CRA for the years tax filing, stack the receipts together, indexed by date, so you can turn right to the expenses the CRA wants to know about in its request for information. This is also a natural system for long-term retention, when years have gone by and you can no longer remember the exact date when you bought those ballpoint pens but do remember the year.

The second folder should contain the same receipts, but indexed by type rather than by date. This is mostly for your own recordkeeping and expense tracking. With receipts organized this way, you dont have to look too hard to figure out whether your fuel costs are higher than last year or your capital goods are cheaper. Keep this folder as long as you think you might need it its not for taxes, so theres no retention rule.

How To Easily Organize Your Receipts

ORGANIZING TAX DOCUMENTS FOR ACCOUNTANT, tax write offs for business for etsy shop

Keep all of your receipts is almost the first piece of tax advice everybody learns, and for good reason without an accurate, easily referenced record of the money youve spent, you may not be able to answer the Canada Revenue Agencys request for verification of your business expenses. Learning to organize receipts is especially important for entrepreneurs working in hospitality, auto repair, or other cash-intensive fields, where payments often fly under the radar and audits are frequent. By setting up a good system and sticking to it, you can ensure your company is ready when the inevitable letter comes from the CRA.

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Home Filing System For Tax Documents That May Be Used In Later Years But Not Now

In step 5 of the Challenge, you’re going to organize one of two major categories of tax documents. This category of tax documents are those types of documents you won’t reference in this coming year’s taxes, but may reference in tax returns several years from now. It includes things like home care and improvement expenses, insurance documents, retirement investments and non-retirement investments, etc.

In reality, with the way I’ve organized the 52 Week Organized Home Challenge, you’re actually going to making files for all these types of documents next week, when we organize the files in your home. I’m just mentioning this step here mainly so if you don’t do that challenge you’ll know you need these types of files for organizing all your tax documents.

What Is Tax Accounting

Unlike traditional accountants who tend to their clients overall financial statements and positions, tax accountants focus solely on a clients taxes. This type of accounting is regulated by the Internal Revenue Code, which outlines specific tax laws that both individuals and businesses have to follow when filing their tax return documents. Tax accountants ensure their clients abide by all of the tax laws, and prevent them from accruing any penalties from the government.

Tax accountants offer tax planning advice to their clients, and help them save money during tax time. These professionals create effective plans for their clients to follow throughout the year, keep them on track to meet their financial goals, and protect them from having to pay more than they can afford by the tax deadline.

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Create A Spreadsheet For Work

Maybe youve always worked from home, or youve found yourself working remotely due to the COVID-19 pandemic. Either way, if youre self-employed and work from home, some of the deductible expenses include a portion of cleaning materials, utilities and home insurance, along with part of your property taxes, mortgage interest and capital cost allowance.

To be able to claim these expenses, the workspace in your home must be the principal place of business.

You must also calculate the percentage of your home used for business and apply that percentage to the tax deduction. Create a spreadsheet to add up your receipts for home office expenses throughout the year. Make it a habit to update the spreadsheet once a month. Youll save yourself the headache of scrambling to input and tally up all your work-from-home expenses at the end of the tax year.

Sort By Type Of Tax Document

Get the Tax Refund You Deserve with an Organized Tax ...

For the purpose of this post, I will refer to personal taxes but the same method can be used for business taxes as well.

Now, using your tax document checklist, begin creating separate piles for each type of document you have. If you do not have a ton of documents, you can simply create a pile for income documents and another for deductibles and credits.

Here is what my typical sorting would look like. I usually have a few income documents but lots of credits and deductible expenses.

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Generally Speaking For Three Years

The IRS says you need to keep your records âas long as needed to prove the income or deductions on a tax return.â In general, this means you need to keep your tax records for three years from the date the return was filed, or from the due date of the tax return .

Letâs say you filed your 2017 tax return two months ahead of the deadline, on February 10, 2018. That means youâd need to keep the receipts, tax records, and any other documentation related to the return until April 15, 2021âthree years after the 2017 deadline.

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