Tax Preparation for Your Service Business

For many small business owners, especially new business owners, tax season can be a very stressful time of year. Organizing your business records can seem overwhelming, but if you follow these steps, you’ll have everything you need at your fingertips.

Summarize Your Income and Expenses for the Year

Ideally, you’ve been using some type of accounting system all year such as QuickBooks Online (which integrates with Jobber). Both of these systems allow you to set up bank feeds to pull your business bank and credit card activity into the system. If all of your activity is already in a system, you need to make sure that all of the activity has been coded to the appropriate income and expense accounts and that your bank and credit card accounts have been reconciled to your statement balances.

If you are not yet set up in a cloud-based accounting system, it’s never too late! Software like QuickBooks Online make it easy to import your older banking information. Talk to your bookkeeper or accountant for ideas about how to implement a system like this.

If you’re not quite ready for accounting software and if using an accounting system seems overwhelming, we recommend that you download your banking activity into a spreadsheet where you can sort by a vendor to help identify the similar types of purchases into income and expense categories.

Organize Your Supporting Documents

Make sure all of your supporting documents for income and expenses are organized. This includes your receipts, your customer invoices, required information for meals and entertainment expenses, mileage logs for your business vehicles, and home office expenses. If you have employees, you’ll also want to organize and maintain your payroll tax reports. You should also maintain your business bank and credit card statements.

There are many ways to store these electronically, which is recommended since the ink on many receipts will fade over time.

Gather All of Your Official Tax Forms

If you are a sole proprietor, this could include W-2s, 1099-Misc, 1099-K, charitable contribution receipts, other 1099s types and more. Look for envelopes that say “IMPORTANT TAX INFORMATION ENCLOSED” and set those documents aside with your other tax paperwork. Each of these forms reports a type of income or expense that the IRS will be expecting to see on your return.

If you are filing as a separate business entity, you should still see 1099-Misc, 1099-K, contribution receipts and other tax forms. The IRS systems attempt to match the income items reported to them on your tax return, so it is important to address them in your tax return.

Look for Large and Unusual Items

Review your purchase activity for large purchases such as new vehicles, equipment, or technology. These items may need to be capitalized for tax purposes. Go over this list of purchase activity with your accountant so he or she can help you determine what items can be expensed in the current year, and what may need to be depreciated over time.

Find All New Contracts for the Previous Year

Pull together documentation for any new business loans, documents associated with major purchases such as vehicles or buildings, copies of any documents recording changes to ownership of the business, or any other significant transaction that had legal or formal documents associated with it (a new lease, a sale of business property, a change in legal entity type, a new employee benefit plan, etc.). Your tax preparer will want to review these to ensure that the activity is properly recorded on your tax return.

Review Your Personal Bank and Credit Card Activity

Review your personal banking activity to ensure that you don’t miss any business expenses that were paid for out of your personal account. We often see business expenses such as cell phone service, internet service, or business auto expenses that get paid for personally. Review these expenses with your tax preparer to ensure that the expenses are handled appropriately on your tax return.

Consider a Retirement Contribution

Consider tax savings opportunities that still exist for the previous year. If you have not made any retirement plan contributions for yourself for the tax year, you still have time to do this and potentially save money on your total taxes.

Review Your Situation with a Tax Professional

If you don’t have experience filing taxes, we suggest that you use a professional tax preparer that is available to you year-round. While you may be able to prepare your own tax return using software, we recommend small business owners sit down with a professional experienced with tax preparation for your business in your industry. The tax planning opportunities and compliance headaches that a professional can educate you about are well worth the fees to have your tax return prepared.

If you don’t currently work with a tax professional, the Jobber Certified Advisor directory is a great place to find an expert. Jobber Certified Advisors include bookkeepers and accountants who understand Jobber and the industries that Jobber customers are in. A tax professional will also help you look towards the future and plan for your next year’s tax bill, offer tax savings opportunities, and be available throughout the year for proactive advice.

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