Outsourced Bookkeeping – Tax Preparation Tips for Small Business Owners in 2022

What do you believe the most typical attribute of a growing small firm is? Yes, sales and income. But, the most prevalent stumbling block for any small business owner is income loss owing to inadequate tax planning. Thus, for any business, filing taxes is a must.

Every business goes through a stressful period during tax season. The firms do not all have extensive experience with tax filing, which might harm their production.  

Engaging professional tax advisors like outsourced bookkeeping ensures a safe procedure with new features to aid your company's development. 

Here are a few crucial year-end tax preparation tips that you can follow to finish out the year financially and take advantage of additional deductions. 

1. Organise your company's documents

The first step in the tax preparation procedure is the organisation and compilation of documents. It helps to prepare and submit the taxes efficiently and adequately. 

1. Keep adequate records of previous quarters' financials

If your small business has been around for a long time, you must have a good sense of how it performs in the last few months of the year. For instance, if your firm slows down over the summer, with sales grinding to a halt around the holidays, you must have anticipated this.

Most small firms pay anticipated taxes based on the prior year's statistics. Thus, you should compare the recent three quarters to the previous year's figures.

Ensuring that your company's financial records are in order is essential in tax preparation. Good recordkeeping helps in creating accurate financial statements. Small company owners must maintain gross receipts for at least three years after filing their taxes.

1.  Leverage bad debts to lower your tax bill.

Stubborn accounts receivable is another difficulty with small enterprises. But, it can be a blessing in disguise when it comes to a tax credit (provided you collect it eventually). Accounts receivable can be written down as bad debt. They are deducted from gross revenue to decrease tax for a company employing the accrual method.

Businesses must establish that they tried and failed to collect the receivable before writing it off as bad debt. So, firms may make one last serious effort to gather at the end of the year. If they fail, they can be written off as a bad debt to lower their tax liability.

1. Pay attention to tax due dates and penalties.

The epidemic has reshuffled the tax calendar, including due dates and penalties. It is critical to have a tax calendar to be aware of the tax deadlines. Missed deadlines might result in steep fines, for which you may have to pay extra in the long run. 

1. Choose the correct company entity type.

The majority of firms are sole proprietorships. However, when it comes to claiming a valuable tax deduction, this may not always be the best option. Sole proprietorships are classified as pass-through. The firm pays the individual tax rate depending on the single proprietor's income bracket. So, this means that they are linked to the owner.

The tax rate varies based on ownership. So, the amount of tax a business pays varies based on the kind of business organisation or incorporation. 

1. Examine your inventory for uncollectible debts

Running a business entails a certain degree of risk, and you cannot recover some debts. You may want to get rid of products that aren't selling and deduct the amount you bought for them. When it comes to tax time, inventory that can no longer sell is deducted as an expenditure

What defines an uncollectable debt depends on your company strategy. In any case, you'll need sufficient documentation to back up your claims.

1. The best moment to upgrade your workspace

If you can perform repairs or upgrades before the end of the year, it will help you save money. These are classified as property maintenance costs (tax-deductible).

Small business entrepreneurs, on the other hand, must be cautious in two areas:

• Home office classification: Determine whether your office space qualifies as a home office, as most small firms combine their sites.

• Restoration and betterment belong within the category of improvements in general. Hence, their depreciation may differ.

As a result, it is always a good idea to use outsourced bookkeeping tax consultancy services to assist you in implementing tax-saving measures. 

1. Hire an outsourced bookkeeping tax professional

Small business owners should have their taxes prepared by a tax specialist.

The outsourced bookkeeping tax service providers put together financial reports and up-to-date tax-ready records. They work ahead of time to prepare taxes, ensuring a straightforward and paperless process for you! Failure to correctly submit your income or payroll taxes can spell doom for your small business.

Conclusion 

Effective tax planning and preparation lowers your taxable income and tax rate. It also assists you in taking advantage of all available tax deductions and credits. Moreover, proper tax preparation reduces litigation and protects firms from legal obligations. 

Outsourced bookkeeping assists businesses in their accounting and tax preparation. So, if your company lacks the time or experience to maximise tax deductions, outsourced bookkeeping can assist you in identifying better ways to save time and money.