What exactly do you need to know before filing your taxes? Whether you’re working with an accountant or doing it on your own, FreshBooks has information to help you during this stressful time. Consider this guide your tax handbook, everything that you need from deadlines and forms.
Generally, there are two major questions you will have to answer while preparing your tax return:
- How much money have I brought in?
- How much money have I spent?
You’ll be asked to break down the money into your revenue as well as into the amount of sales tax you have collected (if applicable).
For your Expenses you will be asked to break them out into tax categories. Luckily, FreshBooks follows these same categories, so your Expenses should be ready to go.
If you have been paying estimated taxes in instalments throughout the year you will need to know how much you have already paid.
If those have been recorded within FreshBooks, they will have been listed as an Expense. Check your Expense Report to see how much you’ve already paid. That way, if you end up owing taxes, you will only have to pay the difference between what you owe and what you have already paid.
With an Accountant
The easiest way to work with your Accountant is to give them access to your Reports and Journal Entries in your FreshBooks account. These Reports and Journal Entries will have all the information your accountant needs to help you file your taxes.
If you’re gathering the data yourself, or your accountant wants other reports, here are the ones we recommend:
- Profit & Loss Report – This gives you a breakdown of money you’ve earned and money you’ve spent, including what your costs of goods sold was, and what your Expenses in each category were.
- Payments Collected Report – This lists all payments you’ve received (or entered yourself), pulled from the Payments sub-tab of your FreshBooks account.
- Expense Report – This shows details about the money you’ve spent. You’ll need to export this report as a CSV/Excel file to see taxes on each individual Expense.
- Tax Summary Report – Since the above Reports don’t take sales tax into account (so you don’t overstate anything), this Report will be needed to help you find out the taxes you’ve collected and paid.
There are also lots of other useful Reports you can check out in the Reports tab if you need further detailed information.
Accrual vs. Collected
Some of your Reports will give you the option to run the Report in either the Accrual (Billed) or Cash (Collected) methods. The accrual method looks at the date of the invoice itself, whereas the cash method looks at the date of the payment.
In the US, small businesses are given the choice between the two methods, with the majority of non-inventory based businesses opting to use the cash method. Please note that once you choose to file using one method of accounting, you have to continue to use that method until you get approval from the IRS to switch.
In Canada you’re required to use the accrual (billed) method of accounting.
Depending on your location and your business type, you can download your tax forms from one of the following links:
Services & Professionals
You can file taxes yourself with an online service or use a tax professional for assistance.
- US – The IRS has a list of recommendations here (dependent on which forms you’re filing).
- Canada – If you’re a sole proprietor, or simply need to file your personal tax return, then we recommend using SimpleTax and UFile as programs to help you easily prepare and submit your return.