December’s here, and the end of the year looms ahead. As business owners anticipate the upcoming tax season, critical choices in bookkeeping now can make or break them at tax time. In this series of articles, let us help you prepare your bookkeeping for year-end with confidence.
Evaluation and planning strategies now could pay off in big ways for 2013 taxes. Business owners should examine their bookkeeping for cash flow for the year, profit and loss statements, fixed assets and acquisition decisions, and how to benefit from proper record keeping.
Such things as mileage logs of business miles driven, home office deductibility (if applicable), proper categorizing of income and expenses, and ensuring that personal loans or investment capital is properly treated in the bookkeeping system are all things for consideration as tax season approaches.
Business owners should remember that contemporaneous records are the most legitimate, carrying the greatest weight in substantiating your records. However, in certain circumstances, it may be necessary to reconstruct records. When this must be done, it is imperative that you document how you arrived at the records you reconstructed. Remember to use the best resources possible in this endeavor.
For example, if you must reconstruct your mileage log and you have your Accounts Receivable invoices for the year documenting the jobs, places, etc., use these to guide you through the reconstruction process. Bear in mind that reconstruction should only be used when the actual and contemporaneous records cannot be used or created. The more proof you have to substantiate the deduction, the greater the chances of not losing it under an IRS audit.
No one likes to pay Uncle Sam. How you handle your business and keep your books can mean the difference between paying more or fewer taxes. As shrewd businesspersons, endeavor to legally pay the least amount of tax possible.