Tax season is a busy, stressful time for small businesses, especially if you head into it unprepared. Long before April 15 rolls around, then, it’s important to start getting ready. These 4 simple strategies will ensure your materials are in order before you step foot into your accountant’s office.
Know Your Status
As a business, you’re responsible for filing all of your own tax documents, but you also need to provide any employees or contractors with the tax forms they’ll need – and this needs to be done by January 31. Start by reporting all W2 and 1099 earnings your business paid out to the IRS. You’ll also need to send out their W2 and 1099 forms so that your team members have copies of them, along with any other relevant documents.
Develop A Strategy
Many startups struggle with financial planning, especially during the first few years. That’s no surprise; it’s a hazard of getting a business up and operating. In fact, financial shortfalls are so common during this period that the IRS actually expects businesses to report losses for at least some of their first five years. You shouldn’t take advantage of this allowance, but don’t be worried if your numbers look a little rocky.
Depending on what your initial calculations show, your business should take some time to develop a tax strategy or discuss with your accountant ways that you might be able to reduce what your business owes. Most experts advise taking a cautious approach to your end of year-tax strategy, however, since many small businesses become overzealous in the name of tax savings. The basic principle: your spending will be more than what you save on your taxes – you’re reducing your taxable income, not your total tax burden.
Review Your Quarterlies
Unlike typical employees, businesses and contractors are expected to pay estimated taxes four times during the year. These quarterly payments don’t need to be exact, but they are important and they’ll keep you from being hit with a huge tax bill at the end of the year. As you prep, all of your documents, make sure you have proof of your estimated taxes ready to present to your accountant. Along with your receipts, proof of quarterly payments is important if your accountant is going to produce an accurate filing.
Don’t Forget Extensions
Taxes are due on April 15, but if you don’t think yours will be ready on time, don’t be afraid to file for an extension – it’s easy to do and many businesses find it helpful. All you have to do is file the appropriate forms and then your taxes won’t be due until October 15. Filing for an extension can be of particular help if, for example, you never organized your receipts or you’re not comfortable with your accountant and want to find a new one.
Filing taxes is always stressful, but each year you’ll be a little better at it, if only because your business will be better prepared. You’ll also build rapport with your accountant, which will help your business develop a standard filing procedure. With the right team supporting your business, you’ll move through the tax preparation process with ease.
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