We know you’re probably trying not to think about it, but April means ONE Thing for businesses – tax season. April 15th is fast approaching, and if you haven’t started your taxes yet now is the time to get on it so you don’t miss the deadline.
If you file your taxes late you are increasing your chances of getting audited, which is never fun, and opening yourself up to fees that can amount to five percent of what you owe in taxes for every month that you’re late. When the tax clock is ticking, it’s time to act strategically, so we suggest take in the following tips!
Tax Forms Small Business Need to Know About
Many large, well-established businesses have accounting professionals on staff that handle their company’s taxes. Small businesses and startups don’t usually have that luxury. However, there are a lot of tax preparation software options that make it simpler for business owners to complete tax forms on their own.
The software essentially does the paperwork for you based off of the information you provide. This is going to be much quicker than doing things manually, but you still need to be familiar with the following forms and documents in order to avoid mistakes that could cost you time and money.
- 1099 Forms: Used to notate income payments of $600 or more to employees and contractors, as well as other miscellaneous income.
- Form W-2: Reports wages paid to employees that have income and taxes withheld.
- Schedule A of Form 1040: Form used for itemized deductions.
- IRS Form 8829: Provides guidelines for business use of a home.
- IRS Form 946: Helps calculate deductions for depreciation of business property.
- Small Business Jobs Act of 2010: Outlines tax breaks for small businesses
Because they can vary from year-to-year, it’s important to check on the latest tax deduction and credit updates for the year before filing your taxes. For instance, did you know that as of 2014, the Affordable Care Act now provides business owners with a tax credit for 50 percent of the costs of their employee’s health insurance premiums? For a lot of employers, that’s something they simply can’t afford to miss out on!
Why Professional Tax Help is Worth It
If you’re rushing to get your taxes done, the chances for audit-triggering errors increases. When time is of the essence, expertise and extra manpower can get the job done. Hiring a tax professional will allow you to get your taxes completed on time without pulling your attention away from regular business operations. This is a big time saver for anyone that has never had to file business taxes before. Even if you’ve done your own personal taxes in the past there is a completely different set of considerations for a business.
To expedite the process and save money, do these five things:
- Have your paperwork in order and preferably uploaded online before handing things off to the tax professional.
- If you don’t have everything together yet, hand off income related documents first so that the tax preparer can get started.
- Let the preparer know of any significant changes that have occurred during the tax year, especially if they are referencing previous filing documents.
- Have the preparer complete your personal taxes as well.
- Request that your taxes be e-filed for an expedited process
Long story short, a tax professional is worth the expense if you’re short on time. The additional expense of hiring a specialist to prepare your taxes is a moot point if you miss the deadline and have to pay penalty fees. A tax professional can ensure everything is filed correctly so costly mistakes aren’t made. Also, the cost of hiring a tax preparer can be written off as a business expense on next year’s taxes, which further negates the cost!
Applying What You’ve Learned for Next Year
As Benjamin Franklin pointed out, there are only two things certain in life: death and taxes. We don’t know when we’re going to die, but we definitely when we’re going to be taxed every year. So with that in mind, take these extra steps throughout the coming year and relieve some of the stress of the tax deadline!
1. Quarterly Payments for Freelancers/Consultants/Micro Entrepreneurs
Self-employed individuals have to file their taxes annually like everyone else, but they are also supposed to pay quarterly tax assessments. Form 1040-ES can be used to figure out how much needs to be paid in each of the four payment periods. You’ll also need to set up a pin number ahead of time if you want to pay online through the Electronic Federal Tax Payment System (EFTPS). This is not only the proper procedure, but it will also make filing taxes in April much quicker
2. Keep Financial Records Organized
This is the Achilles Heel of business taxes. Creating a filing system that works for you and your business is the easiest way to make taxes less time consuming
3. Open Credit Card and Bank Accounts for Your Business
This will help you keep financial records organized by separating your business expenses from your personal expenses.
4. Make Tax Preparations Part of Someone’s Job Description
Putting someone in charge of the taxes will ensure that things aren’t being put off until the last minute and that steps are being taken year round to keep everything organized
5. Schedule 1099 Forms First Thing in the New Year
Whoever is in charge of the business taxes should make 1099 Forms their first task after the New Year. Technically these are supposed to be sent out before January 31st so the sooner they are done the better
Are you a master tax filer? Share your top tax tips with us in the comment section or on Facebook.