Six Part Folder Organization for Your Taxes

This Six Part Folder Organization for Your Taxes* is an easy and effective way for you to get organized for your taxes. Here is how it works:

Folders 1-6 should include the following:

  1. Working Trial Balance with adjusting entries
  2. Financial Statements
    1. Balance Sheet
    2. Income Statement or Profit and Loss Report
  3. Accounts Payable Detail Report Including Credit Card Statements at date of Financial Statement
  4. Accounts Receivable Detail Report Including AR Open Invoice Report at date of Financial Statement
  5. Payroll Detail, Payroll Tax Payable verification
  6. Verification detail of each Balance Sheet account other than AR, AP, PR.

NOTE: All Reports should be at date of Financial Statement

The goal of the organizational system is to provide third party verification of every account on your Balance Sheet. (i.e. bank statement, loan statement) in accrual basis reporting. This can be converted to cash basis reports if needed.

If the Balance Sheet is proven accurate, the Income Statement net income amount will be correct. You may have misclassified fuel expense in fertilizer expense or sale of cucumbers in custom work income, but the net income result is the same. Of course you should review and correct all income statement accounts.

This allows your tax preparer, loan officer, business and legal advisors, and most importantly you, to see a true and accurate picture of your farm business at a specific point in time. You will reduce your professional costs by being well prepared and more likely to get a loan.

*This content was prepared by Bill Longbrake for the Alaska South-central C.R.A.F.T Preparing Your Farm Taxes class from November 2016