When it comes to handling your business’ finances, it helps to have an accountant on your side. A report by the NSBA discovered that 42% of small business owners rank handling taxes as one of the top 3 burdens of running a business. This statistic illustrates how important financial management and tax preparation could be for business owners like you. Employing a specialized accountant can shift this load from you. However, first you need to arrange some documents ahead of time, so your accountant has all they need to manage your finances properly.

Why Do You Need an Accountant?

Before preparing the documents, let us first understand exactly why an accountant is essential. Accountants do more than file your taxes. They can help you organize your books, process payroll, satisfy tax laws and offer insights into your business's economic condition. When your business is growing, carrying out these tasks by yourself could become frustrating.

You can also consider accounting outsourcing services. These kinds of services enable you to obtain qualified professionals without needing to work with a full time accountant, saving you money while managing your finances properly.

Getting Started: Simple Identification Documents

Your accountant will first want identification details about you and your business. This can enable them to understand your business structure and file the proper documents.

What to prepare: 

• Your Legal Name and Address: Check your personal identification details.
• Social Security Number/Employer Identification Number (EIN): You are going to need to submit either your EIN or SSN in case you're filing as a person (such as a partnership) or perhaps as a business entity.
• Business Entity Information: Your accountant must determine if your business is a sole proprietorship, or corporation, LLC, partnership, since that impacts what tax returns you'll file.

Last Year's Tax Returns

If you've been running a business for a minimum of 1 year, your accountant needs to see your prior tax returns. These documents provide them with a rundown of the way your business performed in the past and help them determine areas in which you could save money. As an example, they can alert you in case of any missed deductions or credits found.

In case you are dealing with a new accountant or you are outsourcing your accounting for the first time, include several years of tax returns if possible. This helps your accountant understand your financial history.

Income & Expense Records

Any accountant needs accurate records of your expenses and income to prepare your taxes and financial reports. Providing your accountant comprehensive, structured income and expense records can help you stay away from overpaying taxes.

The documents you need are given below : 

• Invoices: In case you issue invoices to clients, collect all invoices issued during the year. Your tax professional is going to use those to compute your total earnings.
• Receipts for Business Purchases: Track all receipts for company expenditures like supplies, software, and equipment.
• Bank and Credit Card Statements: These documents show evidence of income and expenses so your accountant can check your documents.

Many of these documents are simple to pull together if you use a bookkeeping software, and that ought to save you and your accountant precious time.

Payroll and Employee Information

When you have workers, your accountant requires thorough payroll records to show benefits, taxes, and wages. This information includes:

W-2s for Employees 

In case you have workers, you must submit their W-2 forms showing wages and taxes withheld. You will also have to maintain records of any employee benefits like medical insurance or pension contributions that impact your taxes.

1099 Forms for Independent Contractors

In case you employ independent contractors or freelancers, you'll have to submit the 1099 forms which describe your payments to them. This form is essential to maintain for your business as most US companies use an independent contractor at one time or another.

Business Loan & Debt Information

In case your business secured any loans or carries outstanding debts, your accountant will have to know about them. This is essential since loans can impact your business financially, including tax deductions, depending on the interest paid.

Documents to prepare include: 

• Loan Agreements: Copies of any loan contracts (loan amount, payment terms, interest rates) should be supplied.
• Loan Payment Records: Your accountant is going to need records of your loans given back throughout the entire year.

Financial Statements

The most essential documents your accountant needs to have are your financial statements. These statements show how your business is performing financially. If you currently use an accounting software package or hire a bookkeeper, you must be able to create these statements relatively easily.

The key financial statements are: 

• Statement of Income (Profit and Loss Statement): This document details your business earnings & expenses so your accountant can see how lucrative your business is.
• Balance Sheet: This statement displays what your business owns and owes at the end of the year.
• Cash Flow Statement: The cash flow statement reflects how cash enters and leaves your company. It's critical to know your business is liquid and to ensure you can afford future expenses.

Record of Tax Payments

You might have made other tax payments all through the year, including estimated quarterly payments or payroll taxes. Take note of any logs of these payments so your accountant understands what is paid out and what must be looked after.

Kinds of tax payments you wish to document include: 

• Federal & State Income Tax Payments: If you made estimated payments, include receipts or documents.
• Sales Tax Payments: In the event you collect sales tax, keep track of those payments.
• Payroll Taxes: In case you have workers, show proof of any payroll tax payments for the year.

Final Thoughts

Employing an accountant to handle your business finances could help you save a good deal of money, though you should have all the proper documents set up beforehand. Collect identification data, prior tax returns, revenue & expense records, loan details, payroll information, financial statements and tax payment receipts to assist your accountant.

Whether you employ an in-house accountant or outsource accounting services, having these documents in hand ensures your taxes and financial reports are accurate and you can focus on expanding your company. For your accounting needs, consult The Fino Partners for custom assistance suited to your business.

Read Also The Importance of Hiring an Accountant for U.S. Business Tax Planning