Accounting

Get a good accountant who specializes in small business and especially small business taxes. You’ll probably want someone who will do both business and personal taxes. Be sure you know what they’ll charge for their services. Will they charge for telephone questions? Email time? How will they pass on their expenses?

Good accounting practices include always, always keeping a separate checking account for your business. This is an easy way to keep all your business income and expenses separate from your personal ones. This will become necessary at tax time, as well as any other time you’re asked to produce financial statements or other accounting information.

When you set up your business checking account, get a separate business savings account as well. At the end of each month, calculate your business income and set aside the taxes you’ll owe on it into this savings account. Then when tax time rolls around, the money will be there. You won’t have that extra worry of where you’ll come up with the cash in time.

I mentioned above calculating your income on a monthly basis. As you’re doing this, go through your receipts. Keep them in an organized folder or file cabinet by date and/or tax category. Ask your accountant what those categories are for your particular business. Remember that if you’re working out of your home, you may be able to deduct some of your rent, mortgage, heat, electricity, etc. The rules on these deductions are very strict, and you should definitely seek professional accounting advice. Also ask him how to track car expenses between business and personal use. Doing so accurately will allow you to deduct the business portion of your car expenses, including gas, maintenance and insurance.

If you have all these revenues and expenses identified and are tracking them throughout the year, then at tax time, you can put it all together quickly in order to file your tax return. You’ll also have a match between your individual receipts and your checking account or other expense-tracking records. If the IRS comes calling, you’ll have everything neatly arranged for their inspection.

Know the tax rules that apply to your business. For example, if you have an S Corporation, you may be unpleasantly surprised to learn your tax return may be due by March 15th each year instead of the usual April 15th. If you have employees, there are other important tax considerations, not the least of which is getting them their W-2’s no later than January 31st. If you’ve hired temporary contractors who earned more than $600 in a calendar year, you’ll have to send them a 1099 also by January 31st.

Don’t ignore the accounting and tax aspects of your new business, hoping it will all work itself out in the end. Usually, it won’t! You need organization, planning and the assistance of a good accounting professional to be prepared for tax season. And when you run into that one thing you forgot to plan for, don’t worry! There’s plenty of help. Your first stop when searching for tax information should be the Internal Revenue Service (IRS) website at www.irs.gov.