5 Steps to Beginning Your Tax Accounting

As April approaches each year, many individuals and small businesses start the process of tax accounting for the fiscal year end. Tax accounting is intimidating, but the process has largely been automated in recent years. If you have a relatively simple filing, you can complete the whole process yourself given the right materials.

#1 Gather Last Year's Documents

The forms you filed last year will provide guidance into how you will file your taxes this year. Whenever you submit documents to the IRS or state governing body, you should make a copy for yourself. These documents will be used to determine how you filed last year and if changes were made this year. It is best to keep copies in one location, such as a fireproof filing cabinet, so you have them handy in order to fill out this year's forms.

#2 Look for Your Tax Schedules

The income you received will be tracked by your employer along with any tax contributions you made. Depending on how your employer sets this up, you may receive a W2, W4, 1099 or other document. This gets a little trickier for independent contractors. Make sure you file 1099 documents with your various clients in order to have your taxes organized come tax season. You can also use software designed for small business owners or freelancers in order to track your income.

#3 Review Your Receipts

It is best to keep all of your receipts from viable deductions in one area. For example, your filing cabinet could have a section for charitable contribution receipts and a section for business expenses. Make a copy of your receipts for this file so they are all in one place. You can also enter these amounts on a spreadsheet for easy tracking, but the hard copies will be necessary for official filing purposes.

#4 Choose an Accounting Option

You have several options today to gain accounting assistance. The IRS offers free e-file options for most simple filing processes. If this does not work for you, you can print and send in the forms you need straight from the IRS website. Independent accounting firms and software companies, such as H&R Block or Turbo Tax, can also walk you through the process. If you had a complicated tax year due to job changes, major moves or opening a new business, consider meeting with an accountant one-on-one. Even one simple meeting can be sufficient to file your taxes appropriately.

#5 Have Your Checkbook Handy

When you file your taxes, you will either receive a refund or owe the government money. In both cases, it is best to have a checkbook handy. If you are expecting a refund, you can file online and opt for direct deposit of your refund, shortening the time lapse, by entering your account information. Instead of delaying making any tax payments, write a check the moment you file to be sent out immediately. The sooner this is processed, the less stress for you. You may even help avoid an audit by filing early.