Tax Preparation Throughout the Year
We just got out of tax season. Taxes were paid, deductions made, and now you can breathe easily. So you know what that means? It’s time to think about the next tax season! More specifically, you can take steps this year to ensure next year’s tax day comes and goes without stress. Here’s DCG’s small business tax prep checklist guide on how you can prepare for taxes throughout the year.
1. Keep Your Financial Records Adequate, Accurate, and Accessible
At a bare minimum, you should complete monthly bookkeeping to catch any financial discrepancies early. Fixing issues sooner makes the correction process more efficient. Inadequate records could cause you to miss possible deductions or put your business at risk for an audit. Taking proactive steps throughout the year will keep your records organized and make tax season smooth and stress-free.
Make sure you log all incoming and outgoing money related to your business operations. Focus on gross receipts for business income, purchases needed for your products, business expenses, travel if applying for deductions, assets like property, and employment taxes. Use our monthly bookkeeping checklist (interlink blog) to keep your financial records in order all year long, saving you time, effort, and energy when it matters most.
2. Reassess Business Classification
If your business grows substantially during the year, you might need to file under a different business classification. Talk with a tax professional to make sure you’re filling out the correct forms for next season. If you’re unsure about your business tax filing status, schedule a free consultation with one of our consultants here (Interlink). Keep evaluating your business needs and stay informed about what your classification requires.
3. Separate Personal and Business Expenses
Save yourself the headache by keeping business expenses completely separate from personal ones. If the IRS audits your business and suspects financial commingling, they could investigate your personal finances too. Keeping detailed and accurate records for all transactions, income, and expenses is vital. Regularly track payroll, balance sheets, cash flow statements, and any other key financial documents to stay audit-ready.
4. Estimate Your Taxes
Estimating your owed taxes throughout the year helps you avoid last-minute financial stress. Apply estimated tax payments to any income not subject to withholding, including self-employment, dividends, interest, alimony, rent, and pensions. Social Security benefits and unemployment payments may also require estimated payments unless you opt for voluntary withholding.
5. Track Mileage
Tracking mileage ensures you can validate business-related travel deductions. Record distances in a logbook, spreadsheet, or phone app. This logbook will serve as a key tool if you ever face an audit.
In your mileage log, make sure to include:
- Odometer readings at the start and end of the year
- Total mileage at year-end
- Mileage for each business trip
- Purpose, place, and date/time of each trip
Keep mileage records for at least 3–4 years after filing your taxes to cover any audit scenarios. If you operate in California, talk with a tax professional as mileage rules differ slightly.
6. Capital Gains
Profits from selling taxable assets, such as stock shares, are subject to capital gains taxes. Long-term capital gains (for assets held over one year) are taxed at 0%, 15%, or 20%, depending on your income bracket.
Short-term capital gains (for assets sold within a year) are taxed at your ordinary income rate, often resulting in higher taxes. Different rules apply to assets like collectibles, owner-occupied real estate, and certain investment properties. Always consult a tax professional to understand how each asset impacts your taxes. You can schedule a free consultation here (interlink).
7. Stay Updated on Tax Laws
Tax laws change constantly. Unless you’re a tax professional, it’s hard to stay on top of every shift. DeMar Consulting Group can help you stay updated and compliant. Schedule a 15-minute consultation with one of our advisors here (interlink) to learn how recent changes might affect your business.
Knowing what to do during tax season doesn’t have to be stressful. Having a small business tax prep checklist in place throughout the year sets you up for success. DeMar Consulting Group is here to help make your next tax season as smooth as possible. Schedule a free 15-minute consultation with us today and get a head start on preparing for the 2025 tax season.5-minute consultation with us today and talk about how you can best prepare for the 2025 tax season.
