Tax season is the time of the year when businesses and individuals file their annual tax returns. In the United States, the season falls from January 1 to April 15 of each year, wherein the previous year’s financial reports and statements are prepared and filed for IRS review. The preparation and filing is exhausting and cumbersome but since it is our responsibility to do so, we are left with no choice but to succumb to it every year.
There are certain tips that we can follow to ease the difficulty. Know that these are not shortcut techniques but rather a guide to help you easily prepare your tax return.
#1. Collect all expense records to simplify the financial review process.
Gather all payment receipts and all other proof of expenses. This includes cash receipts, financial account statements, credit card statements, canceled or substitute checks, and other financial records. It is best to keep a record of expenses for the year indicating all necessary details and then storing and arranging all proofs of expenses in a box or cabinet. Implementing this process will ensure that all expense transactions are documented; which in turn results to an easier way of recovering data for the tax return preparation.
#2. Itemize tax-deductible expenses.
Tax-deductible expenses help reduce the resultant tax liability. Deductions are classified as being either “ordinary” or “necessary” expenses. Expenses considered by the IRS to be “ordinary” are expenditures that are acceptable and customary in the conduct of business such as office supplies, uniforms, and transportation and fuel expenses. On the other hand, “necessary” expenses are those considered helpful and appropriate to one’s trade or business.
To cite an example, devices such as the laser printer, its consumables including the stock of replacement remanufactured toner cartridges and stationery, all constitute as a necessary expense to print shops, writers or companies engaged in training and development.
#3. Review the previous year’s tax charges and check for changes.
In the course of the year, it is expected that some items in the past year’s tax report ensued changes. Asset depreciation for instance is an item that one should check out. A noteworthy change in one or many of the items can save an individual or business a significant amount of money.
#4. Invest on reliable tax software.
A dependable software purposely for tax planning and accounting will result to a quick and smooth process. IRS approved tax systems are available and medium to large-scale companies can adopt this arrangement. One advantage of this type of system is that it can be connected to any printer to produce physical copies.
#5. Hire an Accountant and Tax Consultant
Given the limited time and with the tedious work required, the hiring of accountants and tax consultants is the best solution. From the collection of necessary paperwork, to the preparation of pertinent documents such as wage and earnings statements, and of the filing of tax returns, one can be assured that they will get the job done.
Preparing and filing of tax returns is painstaking. Thus, any effective method that will come your way is definitely a ray of light. So, it is best to keep and note the incoming and outgoing transactions in the entire year.