Documents for Small Business Taxes
Small business owners need to maintain and keep track of a variety of documents in order to make sure they pay the right amount of small business tax come tax time. The information provided by documents such as receipts and payroll records will prove to be absolutely crucial when the time comes to calculate the amount of tax that needs to be paid. These documents also provide proof of income and expenditure should a small business owner need to present such evidence.
Receipts
It’s crucial to keep hold of both expense receipts and sales receipts for tax purposes. Expense receipts are basically receipts for any business expenditures. Keep these receipts in chronological order, filing them from time to time so that they can be easily found when required. It’s also important to keep a petty cash book as a record of minor cash purchases and expense records related to any vehicle use and repair. Sales receipts are necessary to document a business’ gross income when it’s time to file and pay taxes. In the case of retail businesses, such receipts may include cash register tape as well as tallies when the register is closed out at the end of the day. Service businesses need to keep copies of all customer invoices.
Ledgers
Small business owners should put the information found in their sales and expense receipts into ledgers. A ledger is a spreadsheet breaking down a business’ income or expenditure into categories. Ledgers provide business owners with a format to tally these numbers. Categories for a business’ income may include wholesale and retail or sales and services. Payroll, supplies, rent or mortgage, equipment and utility bills are all examples of expense categories. Track all expense and income categories on a monthly basis, calculating annual totals.
Payroll Documents
Small business owners must also create and maintain specific documents pertaining to payroll tax. To create such documents refer to the information given on all the business’ payroll records. These records include employee time sheets and any spreadsheets that track hours worked, gross income, taxes withheld from paychecks and records of federal tax deposits showing how much has already been paid towards the business’ payroll tax obligation. If the business has overpaid or underpaid tax during a previous quarter, the owner will also need a record of this in order to make the required adjustments. This is why records of past quarters are as important to keep and maintain as records of the current one.
Once a business owner has all of these documents in order, it becomes infinitely easier to keep track of what taxes need paying, when they need paying and how much tax to pay. It really is worth spending a couple of hours one day after the close of business or on the weekend to make sure that all important records and documents are where they need to be, are complete and make sense. Doing this now will help a business save a lot of time and unnecessary expenses in the long term.
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