Federal income taxes, state income taxes, city business license tax, sales tax, payroll taxes, wow! Taxes and recordkeeping can be quite a load.
Your record keeping will make or break your business success. Setting your books up correctly from the start will make everything easier when it becomes time to prepare your taxes.
Here are some keys to success:
- Open a separate checking and savings account for your business.
- Get a new visa card strictly for your business use.
- Keep all of your receipts, job invoices and bank statements.
- Purchase a box of file folders to store your receipts, invoices and bank statements. Keep them in a file drawer or file storage box organized one folder for each month.
- Keep separate files for insurance, sales tax, business taxes, and licensing.
- Maintain mileage logs reflecting odometer readings and job names.
- Use a computer based bookkeeping system and set up your chart of accounts as shown below.
- Keep on top of your bookkeeping. Don’t let it pile up!
- Be aware of the different sales tax rates you may have in your area. In my immediate vicinity there are four different sales tax rates. Because of this, I keep track of my sales by area. This helps tremendously when the time comes to complete the sales tax return!
I do all my own bookkeeping and file the returns myself. I use Quicken® because it is inexpensive and easy to use. Any bookkeeping system should help you successfully track income and expenses and easily complete your taxes.