Tax season is already stressful for a person dealing with personal finances. But when it boils down to finances of a small business, it can be highly stressful. Just like you would typically deal with your own finances, your current small business will need to be ready for that time when business taxes are due.
Here are some things to help your small business be ready when tax season comes around:
- Organize your books and records
This process entails gathering your previous tax forms, expense receipts, invoices, bank statements, and other pertinent documents for bookkeeping. Organizing your records should happen way before tax season hits. Secure your receipts in one area. You can even convert your receipts digitally, but keep your original receipts in case something goes wrong with your PC. Making use of file binders or cabinets to keep your documents can be of big help when you need to file taxes.
- Keep in touch with your tax advisor
Regardless of how long you’ve been doing taxes, when it boils down to any small business, you’ll want to have a tax advisor look into your taxes before submission. They’ll help you by getting the necessary tax deductions you’re qualified for and hopefully save your small business money along the way.
- Gather the necessary documents required
When it comes to your employees, you’ll need to hand out their W-2 forms by the end of the first month of next year. You’ll also need to send them to the Social Security Administration (SSA). The W-2 indicates the overall earnings that were paid and the withheld taxes from the previous year.
Aside from the W-2, you’ll need to submit a W-3 form before February closes. The W-3 form basically indicates the overall W-2s. For workers making at least $600 in the past year, you need to have kept track of certain things from the previous year. Possessing W-9 form records — business licenses and certifications of a contractor — can aid you in getting the 1099-MISC form ready for those contractors. The form should be sent to the contractor by the end of January. This will highlight payments made by each contractor.
- Do research
Doing so will help you determine the kind of deductions you can use and see if any write-offs is applicable to your small business. This may include anything from the latest equipment purchase to your company vehicle. One deduction you haven’t thought through is business insurance. In certain business insurance policies, insurance premiums may be factored as a business expense and are considered to be tax deductible.
- Make paperwork a priority
You have a lot on your end when it comes to running a small business. You may be tempted to prioritize less on your financial paperwork. It’s important you look into your tax issues in a timely manner. Missing out on a specific file date will lead to penalties and accumulation of back taxes. Putting off your back taxes can snowball the situation up to point you’ll be overwhelmed with tax debt. It’s best to stray from tax liens, wage garnishment, and other fines by making the right payment prior to the deadline.
Tax laws are complex for anyone especially for small business owners. They may, at times, seem like impossible to comprehend. In addition, a tax error can lead to severe consequences. Whether you have plans on collaborating with a tax consultant or you’re confident enough to file taxes on your own, you’ll need to keep the previously mentioned tips in mind to ensure the financial future of your business.