As we get close to the end of the year, it’s essential to think about the systems and routines you have in place to ensure the end of year tax filing process is easy and successful. Planning and organization now will save you hours and hundreds if not thousands of dollars next year.
Below are a few critical tips to get you going in the right direction.
Stay tuned: Soon, we’ll be sharing a link to a comprehensive free resource, the Gym Owner’s Finance Guide, which will help you with tax prep and so much more.
Understand Your Business Structure
Not all businesses owe the same amount in taxes, so you must understand how your business is set up. Do you have a Limited Liability Corporation? A legal Partnership? Or, have you not yet set your business up as a sole entity? (You MUST do that ASAP if that’s the case.) Knowing how your business is set up makes all the difference at tax time.
Always Keep Personal and Business Accounts Separate
Of course, you’re busy. Sometimes it’s easier to pay for a business expense with a personal credit card, or vice versa. However, that’s a huge mistake in terms of taxes. One reason you must avoid comingling your business and personal finances is that doing so can open you up to increased legal liability, not to mention creating a massive mess at tax time.
Keep Detailed Records
Establishing a few file folders now and tucking all records and receipts away will make all the difference come January. We know you’ll be thanking yourself if you save records of everything you spend during the year. Too many business owners lose money because they didn’t keep detailed records, so they end up missing out on both business and personal deductions.
Know the Difference Between Capitalized and Deducted Expenses
Some expenses are deductible, and others must be capitalized. You should know the difference between them. Sure, if you hire an accountant, they can take care of your depreciation schedule for your capitalized expenses. But knowing the difference between the two when making significant business purchases will help you make informed decisions.
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