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.
The best way to avoid feeling overwhelmed come tax time is to simply be prepared. 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 make sure everything is logged and correct in your books—and don’t forget to reconcile all your accounts to avoid headaches come tax time.
While cleaning up your bookkeeping, keep an eye out for any personal expense records that may have found their way into your business books. Mixing business with personal expenses is one of the most common mistakes made by business owners, and it can cause some real issues during tax season.
Once your books are in order, you’ll be able to get started with your taxes more confidently. 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 needed to file your taxes before you get started can save you a lot of hassle and help you avoid mistakes. Depending on the structure of your business, there are a number of different forms you may be required to file 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. Still, it’s a good idea to check for any changes in tax code before you get 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.
Be Financially Prepared
The last thing any business owner needs is to be hit with an unexpected tax bill—especially if you 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 put their experience and specialized knowledge to work for you so that you can claim every last deduction/credit while enjoying peace of mind that your taxes were handled 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!
