For small business owners, preparing for tax season is often stressful and time-consuming. With forms to fill out and receipts to track down, there’s a lot to do in a little time. Before tax season starts, pick up a few tips that will help your business file on time.
Preparing for Tax Season Should Start Early
Starting tax preparation early is best. It gives you time to get organized and prevents a mad dash at the tax deadline.
Once you are ready to begin preparing for tax season, follow these basic steps to bigger tax savings.
Know your Tax Forms
The first step is to know what tax forms you will need to fill out when filing your business tax return.
The IRS does not have one universal business tax form. Instead, the type of document you will need depends on the nature of your business.
- Sole proprietors attach a Schedule C to a personal income tax return or use a 1099-MISC
- C-corporations use Form 1120
- S-corporations use Form 1120S
- Partnerships file Form 1065 as an informational return and submit personal shares of business expenses, income and losses on Schedule K-1
Tax liability tends to vary depending on business type.
Gather your Financial Records
The next step is to gather all of the business financial records you need to fill out your tax form. Although what documents you will need may change according to your tax form, these are a few of the most common:
- Income statement
- Balance sheet
- Bank and credit card statements
- Payroll documents
- Last year’s business tax return
- Partnership agreements
- Accounting documents
- Asset purchase details
- Depreciation schedules
Once you have found all these important records, you will be ready to begin identifying tax savings.
Know your Deductions
The IRS gives small business owners many opportunities to save. But, you need to know the ins and outs of tax laws when preparing for tax season.
5 Common Small Business Deductions
- Vehicle Expenses
- Salaries and Wages
- Professional Services
- Bonus Depreciation
- Home Office
In addition to these five, Federal and state tax codes also include many other opportunities to lower your taxable income, including business depreciation. Often, the best ways to increase the size of tax return is to get assistance from a professional tax preparer.
Make an Appointment with a Knowledgeable Tax Accountant
No matter what industry your business specializes in, preparing for tax season is never easy when you do it alone. If you need help with tax planning and preparation, ask a local accountant for help.