The importance of recordkeeping for income tax preparation.
Financial information helps us all make better decisions about how to most effectively utilize our limited resources. Starting a business extends the benefits of that same prudence, that is to keep accurate financial information, to external users such as investors, creditors, and regulatory agencies. For example, the Internal Revenue Service uses our personal financial information to determine our share of income tax. Overall, the objective of proper bookkeeping is to readily provide accurate and timely financial information that helps with tax reporting, obtaining loans, and more.
Your tax professional should be knowledgeable, trustworthy, and efficient. When comparing credentials, make sure to choose a tax professional that understands your particular circumstances and their impact on your reporting requirements. Choosing a tax professional should be aimed at preventing compliance issues down the road. It's better to spend the time and money getting things right the first time than to have to spend it on fixing the problem down the road. Tax resolution services, for example, could be costly and stressful.
Do You Need Bookkeeping Services?
Are you a small-business owner seeking to obtain a small-business loan? A non-profit seeking to obtain a grant? Preparing a business plan using accessible templates and spreadsheets might be appropriate for your circumstances. On the other hand, once you’ve established a fully operating business, systems that capture periodic activities might be more appropriate and might require setting up an elaborate accounting information software program such as QuickBooks or Sage.
Whether you are required to report to lenders and partners or are simply interested in growing your business, diligent reporting is critical. The incentive to transparent financial reporting, while it may not be particularly mandated, is that owners make better investment and management decisions. An extra bonus to on-going financial record keeping comes when it's time to file your tax return and your information is summarized and ready to go. Or when you decide to take your company public and your prospectus requirements are met in regards to internal controls over financial reporting.