How to Prepare Your Books for the October Tax Extension Deadline

If you filed for a tax extension back in July, this is your heads up that the final deadline to file your taxes is coming up fast.

With 2020 being so crazy (especially for healthcare workers), it’s understandable if you’ve forgotten that the tax extension deadline is almost here, especially since this year we had only three months between deadlines instead of the normal six. But that doesn’t mean the IRS will just let it slide. Although the initial deadline to file taxes was moved from the usual April 15^th to July 15^th due to stay-at-home orders, the tax extension deadline was not included in that move, so that deadline remains October 15^th. If you’re not yet ready to file your taxes, let’s go over what you need to have in order by that date.

Separate Your Personal Money from Your Company’s Money 

This should be done as soon as you open your business, but a lot of small business owners make the mistake of paying for business expenses out of their personal checking accounts. Doing so means it takes longer to separate out your personal expenses from your business expenses when you’re getting ready for tax season.

If you don’t have a dedicated business account (or at least a dedicated credit card for business expenses), you should start separating out your personal expenses from your business expenses so you don’t miss the October 15^th deadline. And talk to your bank about opening a small business checking account right away so you’ll be prepared for tax season next year.

Record your transactions 

Hopefully, you’ve been recording all your business transactions (income and expenses) as they come up, including the amount, what it’s for, and the date. Before filing your taxes, you need to make sure you know all your business transactions for 2019 and that they’re all properly recorded. It will make it that much easier to do your taxes when it comes time to calculate your deductions.

Reconcile your accounts

Ideally, you or your bookkeeper is balancing your books on a regular basis – at least once a month. If it’s been a while since you last looked at your books, now is definitely the time to go over them and make sure every transaction is accounted for and correct because you need to know whether you made a profit or suffered a loss and how much.

Check Your Bank Records

Once your own books are in order, you need to compare them to the bank’s records to make sure they match. If there’s any discrepancy, you need to find out if you missed something or if the bank did.

Consult with a Professional

How much time will you spend getting your company’s finances ready for tax season without a professional to handle it for you? How many patients could you help in that time? How much more money could you bring in for your business when you’re not worrying about how to organize the money you already have? You can make tax season easy this year by handing off the prep work to a professional bookkeeper so you can focus on doing what you do best.  This way you never have to worry about filing for extensions or paying extras fees, because you can make the original tax deadline.