Why? Because pennies add up to dollars, and dollars add up to tax savings. Every transaction plays a part in determining your business’s total revenue and net income, which, in turn, determines your business income tax liability. Every penny matters in taxes. Here are some questions that touch on what I’m saying.
- How have you handled your credit card transactions?
- Have you recorded your expenses?
- Have you generated new business?
Think about it: missing out on a payment, miscalculating your gross receipts or sales, or failing to record costs incurred are small incongruities that can throw off your entire financial picture; this could lead to an inflated tax bill or even missed opportunities for tax deductions.
Every penny means tracking every single expense.
Think of every expense you record as a potential tax deduction, from the typical expenses (like office supplies) to the more substantial costs (like investment income or fair market value adjustments).
Every penny means accurate financial documents.
Your income statement, balance sheet (assets, liabilities, and shareholder equity), and cash flow statements must tell the same story if you want to save money on taxes.
In other words, you need to keep a clear, accurate picture of your business’s financial standing at all times.
Cash or accrual accounting? What’s right for your business?
Your business’s accounting method – cash or accrual – can significantly affect how business income and expenses are calculated and reported. This choice of accounting methods matters a lot when it comes to taxes.
With the cash method, you recognize income when it’s received and expenses when each is paid. It’s simple.
But if you’re a business dealing with a high volume of customers and credit card transactions, the accrual method may be a better option. This method recognizes income when earned, not just when it hits your bank account.
Every penny matters in taxes, and accounting practices matter, too.
Every penny means overall financial health.
It’s not just about being meticulous; it’s about understanding what the pennies have to say about your business’s financial health. The more accurately you track your business’s income, sales, and expenses, the better positioned you are to make informed business decisions.
Let’s get every penny out of your tax savings.
Every penny matters in taxes. That’s the mantra that leads to tax savings, better financial planning, and future growth. Take the time to focus on the details, and you’ll see tax savings and business fundamentals improve. If you don’t know how to start, contact me.
Talk soon,
Jeremy A. Johnson, CPA