Unless you’re in the accounting or tax preparation business, doing the books and paying taxes probably isn’t what you love—it’s just part of the job. But it’s essential.
This post provides a general overview of small business bookkeeping and small business taxes and gives you tips for handling them effectively so you can spend more time doing what you do best.
What is Small Business Bookkeeping?
Small business bookkeeping, in the most general sense, is keeping track of the money that comes in and goes out of your business and generating or recording the correct documentation for these transactions.
One of the main goals of the bookkeeping process is to have a record to support your tax position at the end of the year. Proper bookkeeping is also necessary for the accurate preparation of financial statements.
Why is Good Bookkeeping Important for a Small Business?
The IRS announced that it will be increasing the number of audits it conducts on small businesses by 50% starting in the 2021 tax year, so now is a great time to start to get serious about your bookkeeping. If you get audited, you need to be prepared to defend your tax position.
With good bookkeeping, you’ll have a lot less to worry about in the event you’re audited since you’ll have a record for everything that you’d need to turn over to a tax auditor.
Bookkeeping is time-consuming and often tedious, but ignoring it is a surefire way to lose track of your business and obligations. Without accurate bookkeeping, you have no reliable way to know how much money you have (or don’t have) or how much money you’ve made (or lost).
Important Tax Considerations for Small Businesses
The conversation about bookkeeping is inseparable from the conversation about taxes. One of the worst things for any small business owner is getting into unexpected trouble with the IRS. Staying on top of your bookkeeping will put you in a strong position to contend with the IRS, should you ever get audited. As you’re closing out your books, never lose sight of these important considerations.
Accounting basis - For businesses using a cash basis or an accrual basis for accounting, it’s important to keep an accurate calendar of revenue and expenses. If you're on a cash basis (an immediate recognition of revenue and expenses), you pay tax on the day the money comes in or goes out. With accrual basis accounting (which anticipates revenue and expenses), the tax calculation is determined based on when the revenue is in the books as receivable.
Payroll taxes - You really have to be on top of your game with payroll taxes. They’re complicated, and the consequences for mistakes can be severe. It is generally recommended to use a payroll services provider to handle this portion of running your business. If you’re managing payroll and payroll taxes on your own, take extra care to get everything right.
Estimated taxes - Small business owners that are sole proprietorships, single-member LLCs, and S-corps may have less daily bookkeeping to do than larger firms, but there is still plenty of benefit to keeping good records of cash flow. Keeping your books updated will help you create a historical record of your revenues and expenses so that you can more accurately budget for estimated quarterly tax payments. This is especially useful if your revenue varies widely from year to year.
Benefits of Using a Bookkeeping Service
There are many benefits of bringing a bookkeeping service onboard to help you do your business accounting. One of the clearer advantages of working with a bookkeeper is that it shifts the burden of bookkeeping away from you so you can focus on the parts of running your business that are important to you.
You’re in business because you’re an expert at whatever you do—so if there is an opportunity to have more time to do what you do best, why not take advantage of it?. Outsourcing your bookkeeping to a professional bookkeeping service is a great way to reclaim time you’d otherwise lose keeping up with the administrative task that is bookkeeping.
Working with a bookkeeper will also help you avoid common mistakes that tend to lead to an audit, such as commingling business and personal expenses or improperly filing a Schedule C.
Why Choose Tax Relief USA for Bookkeeping?
You’re an expert at what you do. And so are we. Tax Relief USA offers small businesses professional bookkeeping services with a personal touch.
Our clients come to us with complaints of bookkeeping being too hard and time consuming to do properly. We step in to take on the burden and lighten the load so you can focus on what matters most to running your business. The time commitment needed from you is minimal compared to an online bookkeeping service that requires a lot of time and data entry. We’ll just need a bit of time and information from you, and we’ll be able to handle most of it on our own.
We’ll get you organized, reconciled, and help set up your books so that you can generate financial statements that make sense and give you a clearer financial picture of your business.
We can work within your instance of QuickBooks to help get it cleaned up and operating smoothly. We can spot problem areas and categories where you could benefit from a change, and get you connected with the right partners when necessary to help automate some of the most tedious parts of running a business, such as writing checks and doing payroll.
If your books are messy, we’ll come in with the right processes to help you get them cleaned up and get you into better shape for success in the future.
Tax Relief USA offers clients the added bonus of being a professional tax services firm. We do a lot more than bookkeeping. Whether you need help getting your taxes filed, or you’re in a more difficult situation where you owe back taxes, or you’re being audited or levied, our experts are licensed in all 50 states and are here to help you with any troubles you have with the IRS.
If you’d like to know more about how Tax Relief USA can help you with your small business bookkeeping, or if you have any questions about your taxes, please book a meeting online with one of our tax experts.
Want to learn more about how Tax Relief USA can help you resolve your issues with the IRS? Give us a call at (408) 533-1814 or answer a few questions here to get tax help now.