With tax season right around the corner, many business owners find themselves feeling at least a little stressed out this time of year. Even under ideal circumstances, tax season is a busy and hectic time of year for hard-working business owners; if you’re not confident in the state of your taxes, this can make matters worse.
Being prepared is the best way to avoid feeling overwhelmed during tax time. The good news? There are plenty of simple yet effective steps you can take now to make tax season significantly less stressful.
Organize Your Books
Getting your books in order will make all the difference when it comes time to file your business taxes.
Now is a great time to ensure that you log and verify everything correctly in your books, and remember to reconcile all your accounts to prevent headaches when tax time comes. While cleaning up your bookkeeping, keep an eye out for any personal expense records that may have found their way into your business books.
Business owners commonly make the mistake of mixing personal expenses with their business finances, and this can create significant issues during tax season.
Once you have organized your books, you’ll be able to start your taxes with more confidence.And if the process of reviewing your books is a little time-consuming this year, make an effort to do this throughout the year from now on to make your life easier.
Have the Right Paperwork
Having all the paperwork necessary to file your taxes before you begin can save you a lot of hassle and prevent mistakes. Depending on your business structure, you may need to file various forms along with your taxes. Aside from your basic 1040 Schedule C (income/loss form for your business), you may also need to file 1099s (money paid to independent contractors) or W-2s with the IRS.
Not sure which forms you need? If you filed business taxes last year and your business structure hasn’t changed, you can typically count on using the same paperwork as you did in the previous year. It’s still a good idea to check for any changes in the tax code before getting started.
By having this paperwork easily accessible, you’ll save yourself the time and hassle of digging up these documents when it’s time to file. You’ll also want to make sure you have the right reports and data handy to go along with these documents; this will save you from having to dig around for it last minute.
Know Which Deductions/Credits For Which You Qualify
Don’t leave money on the table this tax season; take time to research potential deductions and credits and find out which ones you can claim on your own business taxes. No matter what industry your business operates in, there are bound to be some major deductions that can reduce your tax burden.
The most important thing to remember when claiming tax deductions or credits for your business is to keep detailed documentation of all your business expenses. Find a secure place to keep your receipts, invoices, and other proof of spending throughout the year. You can make tax time even easier on yourself by categorizing these files by deduction.
Any business owner doesn’t need an unexpected tax bill, especially if they don’t have the funds to pay it. In reality, however, most businesses pay up to 30% in taxes each year, so it’s a good idea to have at least that much set aside to cover your own tax bill (assuming you haven’t been paying quarterly taxes throughout the year).
Many business owners find it helpful to set aside a set percentage of their business income each year to help pay for taxes. This can take some of the sting out of your tax bill when the time comes to pay up.
Work With an Experienced Accountant
If you’re still feeling overwhelmed or simply want to make filing your taxes easier this year, it may be time to consult with an experienced business tax accountant. A true professional will leverage their experience and specialized knowledge to help you claim every last deduction/credit while ensuring you enjoy peace of mind that they handled your taxes correctly.
A tax professional can also build a tax plan that outlines each of the above steps (and more!) to help you prepare for taxes throughout the year.Looking for an accountant you can trust with your business tax needs? We’d be happy to help! As a CPA firm, we’ve helped hard-working business owners save hundreds of thousands of dollars per year. At Tiffany Phillips CPA, we know how to save businesses money in ways that traditional CPAs don’t. Reach out at (713) 955-2900 to find out more about our tax services and what we can do for you!