Time To Start Organizing – For Income Tax Time

Essential Bookkeeping Tips For Tax Time

For many #expats and #business owners, tax season is a nightmare. Even if you’ve done “most” of your #bookkeeping tasks for last year, there may be some tasks you’ve put off.

If your books are maintained properly monthly, the “heavy lifting” is minimized at tax time.

Following is a “to do” list to make life easier for yourself at tax time.

1. Reconcile your bank, credit card, and loan accounts every month.

   • Without reconciling bank accounts, you have no idea what your true available balance is.

     • Your accounting system should be "the truth" of this; as it shows checks or payments made, but not yet showing up in your bank account balance.

   • You may THINK you paid a bill because it is recorded in your accounting program; but that bill payment is not showing up in your bank statement.

     • Without reconciling your bank accounts, you may not realize this is an issue.

2. Revamp your filing system and/or go paperless.

• How long will it take you to find a specific invoice or receipt from a certain vendor in May 2020?

  • Going #paperless is one of the best decisions you can make.

• If organized and implemented properly, it can take just seconds – or a few minutes- to find a specific document.

3. Keep your business and personal finances and accounts separate – especially in owner-operated businesses.

• This is called a co-mingling of funds and makes proper bookkeeping very difficult.

• It can also potentially jeopardize the legal liability protection afforded by an LLC or Corporation identity.

4. Review Open Invoices (A/R)

• Many business owners have “messy” books with Invoices paid, but the Invoices are still “open” on the books.

• This creates a situation where revenue is being “double-booked”.

  • This overstates cashflow and profitability and can result in a business owner paying higher taxes.

5. Review your Open Bills (A/P)

• Review your open bills just like open invoices.

• If a bill has been paid, but still showing up in your Accounts Payable Aging Summary, then the payment is either not recorded in your accounting program or has been recorded incorrectly.

  • This may cause a duplicating of the expense in your financial statement…thus affecting taxes owed.

6. Review your P&L

• Your P & L should be reviewed monthly, however for tax season the full year should be reviewed – month by month.

• Do the numbers make sense?

• This is also an opportunity to reflect on your year and identify trends in the numbers – both positive and negative.

  • This should influence your strategic planning and budget for the new year.

7. Review your Balance Sheet

• Verify that all assets and liabilities are properly stated such as: inventory values, prepaid expenses, fixed assets, outstanding loans, bank accounts, credit cards, A/P and A/R.

8. Keep track of vendors who will require a 1099 (U.S.) or T4A (Canadian)

• Verify your vendors and independent contractors that the above forms are required to be sent to.

• It is best if you have an automated system which sets up this tracking automatically when initially setting up a vendor or independent contractor.

  • Many of the accounting programs will do this by simply checking a box.

Honestly, the above items should be completed monthly – otherwise you will not have accurate and up-to-date reports to evaluate how your business is doing in regard to #financial health.

Hopefully the above tips will help you this tax season and moving forward!

If you have any questions regarding bookkeeping, please do not hesitate to

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