Tax Prep 2015: Last Year's Over - Now What?


Even though March and April seem like they’re far away, they’ll be here before you know it. Now is exactly the time to start wrapping up the previous year and start looking ahead to 2015.

Getting Ready

Regardless of whether you’re preparing your own returns or if you’re working with a professional tax preparer, the work you do should be basically the same.

For most people, accounting and taxes can both be a little daunting. If you don’t know what you’re doing, by all means, get some help from someone who does. You’ll save yourself hours of frustration and possibly loads of money avoiding costly mistakes.

If you work with a tax professional, they can help advise you on the pros and cons of different entity types and help you choose the appropriate one for your business (S Corporation, C Corporation, Partnership, Sole Proprietorship, etc.).

Even if you’re working with a tax professional, that doesn’t mean you’re off the hook. You still have a ton of leg work to do on your side. But tax professionals can make it a little bit easier by providing you with a specific checklist of all the items they’re looking for which helps give you direction and stay organized. Here are some of the things they’ll likely ask for:

  • Copy of your general ledger / financial statements (i.e., QuickBooks backup, Xero or QuickBooks Online login, spreadsheets)
  • Copies of previous years’ tax returns
  • Bank statements
  • Credit card statements
  • Copies of payroll tax returns
  • Copies of filed Forms 1099
  • Copies of loan documents
  • Inventory counts at December 31st
  • Business mileage
  • Information about your home office
  • Business health insurance information
  • IRS letters and notices

Gathering Data

You should keep in mind that if your company is ever audited, you’ll need to be able to provide documentation to support the income and expenses you’re reporting. Without receipts, the IRS can disallow any expenses you claim, and no one wants that!

Obviously, the best thing to do is to stay on top of your paperwork throughout the year, but whether or not you’ve been keeping up, here are some organizational tips:

  • Go Paperless:
    Scan in your receipts and organize them by name (i.e., vendor name) and/or function (i.e., meals and entertainment or bank statements)... whichever makes the most sense for your business. You’ll save both time and storage costs, and sharing the information with other people, like your tax professional, becomes a snap. (Tip: Check out SmartVault to securely store your documents.)

  • One Year at a Time:
    Keep all receipts for a particular year together in case you’re audited. Then you can easily grab one year at a time if/when you need it.

  • Prioritize:
    Place the most emphasis on keeping documentation that’s the most critical to your business… bank and credit card statements, payroll tax returns, Forms 1099-MISC, auto and telephones expenses top the list because they are so frequently audited. But remember that credit card statements are not sufficient proof of a deductible expense - you still need those receipts!

  • Make It Easy:
    Use cool tools like Hubdoc to do most of the gathering for you. Hubdoc will log into your bank and credit card accounts as well as utilities, telephone, etc. service to fetch statements for months or years at once. This alone can save hours in data gathering time.

  • Comb Through Email:
    Look through your email from the past year and see what attachments you can pull from there. Many companies have sent you receipts already - you just need to download them and save them in your tax files.

Ecommerce Specific Information

Ecommerce businesses have another round of information they need to collect as they get ready for tax time. You can get much of this by logging into your shopping carts and Stitch Labs

Batch deposits (amount deposited into your account) for each sales channel split out into: gross sales, sales tax collected, seller’s fees, and shipping income.

Inventory on hand at December 31, 2014
Note: Stitch Labs doesn’t store history, so if you run the report today, make sure you adjust it for activity back to 12/31

Cost of goods sold - if you weren’t tracking all year, you can calculate this as the amount you spent on product purchases during the year minus the amount of inventory you still have on hand

Forms 1099-K - this is basically notification of all the payments made to your business per marketplace or payment processor (i.e., Stripe, PayPal). You’ll want to provide this to your tax professional with a breakdown of the expenses related to the payment channel.

Ecommerce business costs - you should group and summarize the following common expenses:

  • Product purchases
  • Sales returns
  • Shipping costs (both inbound and to customer)
  • Cloud and ecommerce support tools (Xero, Stitch Labs, repricers, etc.)
  • Mileage back and forth to USPS, UPS, Fed Ex

The Year Ahead

Now that you’ve taken the time to gather what your business needs, it might make sense for your company to take a step back and think about how to make the process better and get yourself out of the busywork.

An ecommerce accountant, like Catching Clouds, collaborates directly with your tax preparer so you can stay on top of your finances and be organized throughout the year so the end of the year becomes completely trouble-free.


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