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The Best Way to Ease the Burden of Tax Season

It should come as little surprise that the best way to ease the burden of tax season is to keep good records.  When it comes to having good records come tax season, it is imperative to identify a system and stick with it. This doesn’t just apply to how to best handle that shoebox full of receipts, but also your assets and stock.

Avoid Ghost Assets

According to our recent Small Business Accounting Report, 74% percent of small business decision makers surveyed either have never heard of ghost assets or don’t understand how ghost assets affect their accounting books and taxes. Ghost assets – those assets that still exist on the books, but are no longer company property – remain on your accounting books as a result of improper tracking. Implementing an asset tracking system helps prevent ghost assets from occurring. By using asset tracking, you can track the depreciation of company property, as well as the maintenance on company equipment, allowing obsolete assets to be removed from your records when they are no longer in use. This also allows you to pull detailed reports showing how your assets depreciated over a set amount of time, based on the depreciation method you put into place. Utilizing an asset tracking system can also assist you in auditing your current assets, allowing you to quickly identify when an asset has gone missing, been damaged, or is no longer in use. By barcoding, labeling and tracking your assets, you can avoid ghost assets come tax season, and manage your business, and your money, more securely. 

Know Your Up-to-Date Stock Levels

Stock can also significantly impact your taxes. When reporting taxable income, you are allowed to deduct your inventory costs. You can choose to list the cost (the lower of cost or market value) or even “other.” Each of these methods could yield different figures, but they will all affect the amount of money you can deduct from your income for tax purposes. However, stockpiled inventory can cost you money at tax time - so implementing a stock tracking system that helps prevent overstocking is important. Inventory software and systems, like Wasp’s stock control system, allows you to keep track of up-to-date inventory levels so that inventory can be ordered at the optimal time.

Choosing a Software System That is Right for You

Choosing the right asset and stock tracking software is important. You should ensure that the software system you select offers you the ability to not only track quantity and location, but to assist in depreciating the cost of your assets and include an effective audit tool.

You should ensure that the software system you select offers you the ability to not only track quantity and location, but to assist in depreciating the cost of your assets and include an effective audit tool.

Lastly, an asset tracking system can allow you to track who is borrowing any assets from your company, whether they be external customers or internal employees. You can easily look up who has checked out the asset and when they return it to you. If you have revenue or expenses that may be recognised by the tax authority at different times than the accounting standard, you may have deferred tax assets. These “can help in reducing the company’s future tax liability”. However, these can only be documented as such when “the difference between the loss-value or depreciation of the asset is expected to offset future profit”.