The new year has arrived, which means it’s time to start thinking about how to get your company ready to file taxes in the coming several weeks.
Whether you’ve been running your business for years or are just starting, here are some ideas for things to think about as you prepare to deliver last year’s data to your tax partner.
Why think about taxes in the next weeks?
The most essential reason to double-check your tax papers is accountability, as well as the desire to figure out how much money you owe the IRS each year.
When you file your taxes, you’re creating a narrative of your business during the previous year that the IRS will rely on in the event of an audit.
Because this procedure utilizes numerous data points from the previous year, you’ll want to give your accounting team (and yourself) as much time as possible to get it right.
If you’re thinking of selling your company next year, you’ll want to get a head start on your tax preparation.
There are a slew of legal papers in play during a sale, and the sooner your finances are in order, the less stress you’ll experience throughout the due diligence process.
What Your Tax Advisor Needs From You
Make sure you have two critical papers in hand before handing your financials over to your CPA partner:
- Your P&L from the last year.
- An up-to-date Balance Sheet.
Why? Because the IRS wants to know how much money you made in order to calculate your taxes based on it.
Accurate tax calculation is critical since profits are taxed and may be examined if they do not add up.
Free 30-Min Strategy Session
By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.
All elements of your firm’s balance sheet must balance one another:
Your bank balances, inventory balances, sales tax liabilities, and much more are all maintained in your accounting software.
Your CPA will want to make sure that your balance sheet and bookkeeping data match at the end of the year so that any money is accounted for.
The bottom line is that you should have these documents done as soon as possible, because you are certainly not the only company your accounting firm is working on taxes for.
The final thing you want to do is drop a bombshell on their process by providing them the information they need to do an excellent job at the last minute.
Where to Find Tax Info in Seller Central (If you’re an Amazon sellar)
Amazon Seller Central is Amazon’s sales dashboard, and if you sell on other platforms, you’ll need tax data from them as well.
However, since the Seller Central interface might be difficult to use, you may discover tax information here.
Skip the “Business Reports” part to retrieve your financial data.
This section doesn’t properly separate out sales, so any information you find here isn’t guaranteed to be correct.
What you should do instead is go to the Payment option and pick a date range report for the tax year you’re looking for.
The Payments Dashboard includes additional payments data, and it’s more accurate than the business report since it comes directly from your Amazon sales.
The fulfillment reports section of seller central includes the Inventory reconciliation report, which can provide you with tax information.
This report summarizes FBA data, including year-end inventory levels for each product line.
You may use this information to calculate COGS by multiplying your ending inventory by your product value.
What Should You do if you are Overwhelmed? (Which is not your fault)
As your company grows larger, the issues you face become increasingly complicated.
When you reach this stage, you must hand over control to the specialists so they can assist you in growing your online business while keeping your focus in your business growth only.
We here at Free cash flow, helping online businesses (like your business) to boost their revenue and doing what other firms miss.
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