There are some things in life that just have to be paid, rent, loan payments, energy suppliers and most importantly, your taxes. Everyone who owns a business must file an annual tax return detailing the incomings and outgoings of your business in order to determine how much tax you will pay. As someone who understands effective business management like George Bardwil would tell you, having a business with watertight bookkeeping is absolutely vital to staying in line with the I.R.S. an enemy that no business wishes to have. Here is why your business should have its finances in perfect order.
Tax Return
When the time comes to complete your tax return you will either be grateful that you worked so hard on maintaining order in your financial department, or be incredibly stressed because you simply weren’t prepared. There is a whole host of information that you need at your fingertips when you are completing your tax return. Social security numbers, personal information, invoices, receipts, details of transactions are just some of the required information that you will need, you can find out all on the I.R.S. website. You need to avoid leaving anything to the last minute as you may not have time to request documentation again or find lost order numbers. Being tax aware means that you spend the year keeping your books to perfection so that when tax return time comes around, you are ready. Another reason you don’t want to make mistakes is that you could well end up missing out on deductions because you lost receipts or claim forms.
Audits
The I.R.S. regularly audits individuals and businesses, they will look through all incomings and outgoings, expenses, and tally your figures up with what was stated on your tax return. It is usually the case that you will have absolutely nothing to hide but the length of time that the audit team will be digging through your details, requesting documents and information, depends on how well ordered you books are. With a good bookkeeping system, audits are a breeze and will take little to no time at all, this will save you hassle and your business upheaval.
Penalties
Remember that the I.R.S. is the government, and unpaid taxes are illegal, with this in mind there are several preset penalties available to the I.R.S. should they choose to use them. Some of the penalties are light/slap-on-the-wrist types which are a gentle and financial reminder to tow the line, others could cost you so much that you could lose your business and others could land you in jail. There is nothing to be gained in playing fast and loose with the I.R.S. late payments result in a penalty, no payment result in a penalty, perceived fraud could put you in jail, missing information could result in a penalty, and the list goes on. The key is to do your tax returns on time, with information that is accurate to a tee because you have have kept your financial house in order throughout the year.