MANY SMALL-BUSINESS owners prepare for tax season by bringing a haphazard jumble of receipts, invoices, bank statements and accounting data to their preparer's office. But the lack of organization can raise filing costs and lead to missed deductions.

"Bringing in a shoe box to an accountant during tax season is almost guaranteed disaster," says Frederick W. Daily, a tax attorney in St. Pete Beach, Fla., and author of Nolo's "Tax Savvy for Small Businesses." "You are not going to be popular, even if you pay accordingly."

A sloppy accounting system also can attract the ire of the Internal Revenue Service. In his experience, Daily says, "poor record-keeping is the No. 1 reason small businesses lose IRS audits."

Tax experts say it's critical to ditch the shoe box and get organized. Here's how:

Pick a Method

To keep finances straight, a number of business owners turn to bookkeeping software such as Intuit's Quicken, QuickBooks or Microsoft's MS Money. Web-based programs such as Quicken Online or NetBooks also are growing in popularity.

When deciding which one to choose, consider your business's cost constraints and respective needs. For instance, says Daily, QuickBooks — priced from $199.95 to $449.95 — is ideal for inventory-based businesses, as is NetBooks, which costs $200 a month. Quicken Home & Business software and Quicken Online, which he says is better oriented for service-based businesses, is regularly priced at $99.99 and $2.99 per month per user, respectively.

Some business owners feel more comfortable keeping track of transactions the old-fashioned way on ledger paper or a business-record booklet. That's perfectly fine, says Greg Rosica, a tax partner in Ernst & Young's Personal Financial Services Practice in Tampa, Fla. The IRS just wants your system to accurately portray income and expenses. "Anything that is suitable for the type of business you're in will work well," he says.

Track Your Transactions

Since business expenses are tax-deductible, keep proper track of them throughout the year, says Bill Fleming, a managing director of private-company services at PricewaterhouseCoopers in Hartford, Conn. Good records can jog your memory at tax time — and come in handy if the IRS performs an audit. Set up a separate bank account or business credit card to better manage transactions, he recommends.

Maintaining a business diary or calendar is good back-up, too. For instance, if you take a client out to dinner, include details of the evening on the receipt and in your diary or computerized expense report. Take notes on your income as well, suggests Daily. In an audit, the more you can verify your business's transactions the better.

Tallying expenses can be complicated if you work from home or travel frequently. Those who qualify for a home-office deduction can write off a portion of utility, rent and other payments; road warriors can deduct a portion of their food and travel costs, plus vehicle costs. Check out this story on writing off mileage. For more on business travel click here. And to read up on home-office deductions click here.

Gather Your Records

Before visiting the tax preparer's office, business owners who opt for a computerized system can simply print out business records for the year. Most accounting software programs, if properly linked to bank and credit-card accounts, track cash flow and automatically input business transactions. Come tax time, "all you need are the printouts," says Daily. "Unless I have some reason to distrust the number you're giving to me, then I don't have an obligation to look at anything."

It's a different case, however, for big purchases such as automobiles and real estate, he says. Some accountants will want to see a copy of the contract to set up the asset to be depreciated over time. Be sure to keep records describing these assets, the date of purchase and how they were acquired, he says.

It's usually not necessary to show your accountant every receipt, but keep an accordion file separating expenses such as travel, entertainment and supplies from larger assets such as computers or heavy equipment. Hang onto canceled checks and other documents that back up your business's expenses. Keep this information for at least six years and tax returns indefinitely, Daily says.

Add It Up

Before visiting your tax preparer, Fleming of PwC recommends "making sure the books balance and that checks written are accounted for." Start with last year's return, as it may shed light on what to gather for your accountant. Plus, it can alert you to any little-used accounts or other income-generating vehicles you may have forgotten about. Then, go through and add it all up. If your total bank deposits are greater than your reported income, for example, you aren't ready to proceed to your accountant.

Also, review all of the checks you wrote during the year. You may spot a missed tax deduction. Going forward, reconcile your account register with your bank statement at the end of each month.

To cover your bases, request and fill out a tax questionnaire (a checklist that probes for information regarding all of your taxable transactions) from your accountant. Click here for a sample.

Meeting with your accountant at least twice a year will help either validate your organizational efforts or point you in a better direction, adds Robert Caplan, a Foster City, Calif., accountant. After all, he says, if you're organized, filing your taxes is not only easier, it can likely be done quicker, which means you could get a refund faster, too.

Write to Diana Ransom at dransom@smartmoney.com.