How to Get Your Small Business Tax Ready | Reporting All Income
The first step in preparing your businesses taxes is to report all of your earned income.
Reporting All Income:
All money received for sales need to be deposited into your business checking account. Deposit totals for the month should equal monthly sales. If you make a deposit that isn’t sales, keep the slip and other paperwork showing what the deposit was; in an audit this will be needed to show why deposits don’t equal sales. This also applies to any deposits you make into your personal account. If the deposit isn’t going to be reported as income on your tax return you may want to document where the money came from and file with your tax return.
1099s received show income for services provided to your business customers that total $600 or more. Compare each 1099 to your recorded sales to each customer to verify the total. This is becoming more important as it shows whether all sales have been reported properly.
Issue with 1099s:
- If you receive credit card payments as well as cash/check payments, carefully review the 1099 Misc for total cash payments received for service.
- Since 1099Ks will show all sales paid for by credit card, you don’t want these payments included on the 1099 Misc or you will have double the sales reported to the IRS.
Your total sales should be higher than the total reported on 1099s. The only way sales should equal 1099 reporting is if – you only do business with other businesses and you never bill for less than $600.