Hello fellow entrepreneurs! Thank you for being apart of our blog reading today. Welcome to another read on The Keys. It’s your favorite Money Motivator – Growth Instigator, Erica Fields bringing you the keys to your financial house!!
Planning is a setup for success. Tax planning involves many parts and bookkeeping is a major one for business. Bookkeeping provides a basis or roadmap for what you might expect to see at year-end for tax filing season. Your income and expense tracking efforts will create a more realistic expectation of what amount of taxes due to your business may incur.
Tracking Income and Expense
Tracking income not only allows a business owner to identify season of good or bad demand. It also helps the owner understand how much tax liability may be due based on the total number of sales and revenue collected throughout the year. Measuring the net of this number with the expenses that are tax-deductible will result in your business net income or tax basis. This final number will provide an idea of the amount of tax due at year-end.
Understanding the who, what, when, where and how of your business gives an advantage in preparing your tax plan. The answers to these questions will help identify what taxes are due for your company and when to pay them. A strong bookkeeping system will aid in answering these questions for you. For example, a company that operates in Harris County, Texas will owe federal and self-employment tax, but will not owe state taxes. Other taxes may also be due such as sales and franchise tax, but these requirements are based on a number of factors. Accurate bookkeeping will satisfy reporting and data requirements needed to fulfill these and other tax compliance.
Having an accurate and up-to-date set of company books will prepare your company for tax season. Daily tracking of income and expenses will set a foundation for your company’s tax plan. You won’t have to guess your net profit or loss and can quickly identify your tax liability.