How to Use QuickBooks for Taxes: Beginner’s Guide
Using QuickBooks for taxes is recommended by the vast majority of business owners. The QuickBooks for taxes features make it easy to generate reports and work with your accountant. You can also grant access to sophisticated inventory management, analytics, and automation features.
With the beginning of each year, it seems that dreaded April is approaching faster than any other month. The anticipation and anxiety of organizing taxes and making sure everything is in order is a concern for many companies. No wonder that over 70% of business owners outsource their taxation reports.
Those who have at least some previous experience with taxation know that each year brings a number of changes into the system. These can range from minor modifications to complete elimination of various tax programs. Moreover, the International Revenue Service (IRS) expects everyone to know about those changes and how they affect their businesses.
However, it doesn’t have to be complicated. Believe it or not, when you’re organized and prepared, taxation can be a breeze. This article will help you prepare for the tax season ahead and show how you can use QuickBooks for taxes effectively.
General tips to prepare for the tax season
Even when you outsource taxation services, it doesn’t mean that you’re completely out of the woods. You still have to prepare financial records and statements. This include things like cash flow calculations, receivables, tax receipts and audits, etc. For people with little finances management experience or background, this can become a real nightmare. Here are some handy tips that will help you minimize stress and improve efficiency when dealing with these points.
Start using accounting software ASAP
Without any hesitation, start using account software. For a relatively small cost, you’ll get massive functionality. Features include inventory management, payroll management, reports and analytics, mobile access, billing, and invoicing. These tools will become your biggest time saver in business management procedures. Thanks to these perks, over 50% of small businesses have noticed a significant decrease in financial errors.
According to market research, the most popular accounting software of 2018 was QuickBooks, and with good reason. The tool is easy to use, offers a whole bunch of useful, time-saving features and doesn’t break the bank. On top of that, the customer service and product maintenance are done with the highest standards. This is to ensure that you won’t encounter security or integrity problems. Finally, taxation laws and changes are always up-to-date. This means that you don’t need to spend the time to get to know about the new laws. The system automatically adjusts everything for you.
Start preparing from the start of the year
Ask any experienced business owner and 10 out of 10 will tell you that the taxation season doesn’t start in March. It begins right after you’ve finished the previous season. Putting in the time to keep a close track of all business expenses and updating your accounting software in a timely manner is crucial, and will save an immense amount of time and effort in the long run. These include taking into account all the non-traditional business expenses like meals, entertainment, gasoline, etc.
Another thing you could do is maintain an online diary and consistently make notes about each business expense and how it relates to your business. Trust me, you’ll find this invaluable when faced with IRS audits. Also, this way you’ll need under 10 minutes every day to deal with the notes and updates, instead of stressful weeks, and even months, after the holidays.
Consider the ghost assets
Ghost assets can become a real burden if you don’t know how to approach them. Moreover, according to the report mentioned above, over 70% of small businesses don’t know what a ghost asset is. A ghost asset is a fixed asset that cannot be accounted for since it is physically missing or otherwise rendered unusable.
Using an accounting tool with a proper inventory management feature can help to keep consistent track of such assets. For instance, when using the QuickBooks online tax return preparation feature, you can clearly see your ghost assets and deduct them from the calculation.
Make use of useful deductions
In contrary to a widespread belief, tax changes, and regulation adjustments aren’t always done to get more money out of your business. Some of the changes are made by the government to help small businesses improve their financial standings and grow. Because of this, it’s a good idea to work with your accountant to make the most out of potential deductions. Some of these include your business car costs, working from a home office, startup privileges, etc.
Similarly, setting up a retirement fund can also immensely ease the taxation burden. When contributing money to a tax retirement fund, you won’t be taxed unless you withdraw that money. So for instance, if you earn $100,000 annually and dedicate $20,000 to a retirement fund, you’ll only be taxed for the $80,000. Before doing this though, make sure to check your local laws and regulations on the amount you can contribute to a retirement fund.
Using QuickBooks for taxes
Using QuickBooks for taxes and inventory management is highly recommended to any small business owner. It helps save substantial amounts of time and effort by allowing you to generate end-of-year reports for income and expenses, profit and loss, and payables and receivables. QuickBooks income tax and QuickBooks online tax return preparation reports are also among the most useful perks. Apart from these, if you prefer your accountant to handle your taxes, you can easily share business information and communicate with him/her on all matters right inside the app.
The QuickBooks income tax management feature allows you to keep track of the income tax you own to the government. You’ll need to set up a liability account for this, but it’s a good idea to consult with your accountant on any account specifics when recording the liability to avoid any future issues.
The QuickBooks online tax return preparation feature helps users to figure out your current tax practice in the Books to Tax workflow. Also, you can identify common inefficiencies and make corresponding adjustments related to the Year-end books review and prepare a valid business tax return report. It is recommended to work with an accountant on this if you don’t have previous experience.
What QuickBooks reports do I need for taxes?
If you’re asking yourself this question, here’s a list and how to find your reports.
- Profit and Loss Report – Navigate to Reports – Profit and Loss Standard – Company and Financials. Find Last Fiscal Year tab in the Transaction Date dropdown menu and create the report.
- Last Fiscal Year Report – Go to Reports – Last Tax Year – Last Fiscal Year, generate the report.
- Vendors and Payables Report – Go to Reports – Vendors and Payables – 1099 Summary.
These should answer your concerns on your question “what QuickBooks reports do I need for taxes?” According to business owners, using QuickBooks for taxes is highly-cost efficient. On top of that, the company has recently surpassed its 2 million registered user milestone, granting them close to 80% market share in the field.
While taxation is mostly a heated topic for many businesses around the globe, it’s not that complex. All you need is an organized approach, a professional accountant and a reliable online accounting tool. When all of these are in place, you’ll be surprised to find that in many cases, knowing tax regulations can be beneficial for your business to make adjustments and maximize deductions.
Using accounting software like QuickBooks for taxes is an excellent way to dramatically decrease the time, stress, and effort you have to put into daily, quarterly and annual taxation operations. Additionally, the software helps deal with the most common account needs. It allows you to automate billing and invoicing, crafting professional invoices, and analyzing your sales effectiveness.
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