This Podcast Is Episode Number 0357, And It's About Annual Tax Return Pointers For Construction Contractors Preparing for tax season is a year-round endeavor. Well-organized small businesses are better positioned to minimize their tax bill while avoiding penalties associated with missing or inaccurate information.   Tip number one for construction company owners is to update financials every month, using a or system. This way, come tax time, everything you need is all in one place.    Second - The Profit And Loss Balance Sheet is what Tax Accountants use.   The numbers on these reports offer a summary snapshot of your business. They are referred to and reviewed over and over by banks and others.   Below is a copy of the "Schedule C” it is the standardized format from the Internal Revenue Service.  Besides the bottom number, what does it tell you? I suspect minimal information. Why? Because the Internal Revenue Service has rules/regulations/restrictions about their forms and as much as they want to cram in more detail. How many pages? What font size? The form becomes the "Bigger Bucket" theory. The "Bigger Bucket Theory" is where data input installs as many transactions as possible into a single line. For example, income can be all of the deposits from bank statements, which may have come from a single z-tape each day. Or Utilities, Office supplies, Marketing, Cost of Goods Sold (COGS) are classified as "Expenses." As the business owner, you may want to know more specific information about your costs and your income to make intelligent decisions. The annual business tax return doesn't need to know which client is profitable – it's all income, it doesn't need to know the details about Costs of Goods Sold – it's all material (or just an expense). It is not relevant to the tax accountant. Remember, it's the "Big Bucket" theory. Of course – most tax returns have gotten longer and longer saying the same thing over and over again. If your construction company files annual tax return as Sub-Chapter S, you know that most of the numbers transfer over to your personal return, and the numbers repeat again.  We have all heard "Garbage In" and "Garbage Out." It is becoming more common to do the bookkeeping "fast"; after all, it should only take about 10 minutes a day. One shortcut is downloading transactions directly from the bank. set up  to map directly into their tax software, which makes it easy to download from the bank "Big Bucket" theory again. What is the purpose of your accounting system? To help you run your business more efficiently or file your taxes? Neither choice is good or bad as long as you have made a choice and understand the outcome.  Like most people, I go to my bank website often, and one of the things I have discovered is that all banks appear to treat each transaction uniquely. How do you get money out of your checking account?  Do you write a paper check that is manually presented to the bank? Do you write a paper check that is electronically presented to the bank? Do you use your bank's online bill pay that mails out a paper check you can present to the bank? Does your bank's online bill pay – use EFT to transfer your funds to the vendor?  Do you pay online using another bill pay service? Do you pay online by going directly to your vendor's website? Do you pay online using pay pal bank? From the bank's transaction report, it looks straightforward. When the actual bank statement comes, the transactions can look differently. Bank breaks transactions into Checks / Debit / ACH / EFT – Vendors may have a different name on the account that accepts each of these types of transactions.  Downloading transactions from your bank can be an excellent time-saver if all goes well. I have heard stories of tax accountants without permission from their clients (they know everything they need to know to file your taxes), downloading a whole bunch of...