Preparing your taxes doesn’t get any easier, and even if you’re a seasoned business owner who has gone through the ritual of preparing your taxes year after year, the whole process can still feel overwhelming and burdensome. While many choose to simplify paying their business taxes by outsourcing their requirements to a tax professional, others prefer to tackle it themselves.
Whether you prepare your own business taxes or pay a professional to do it for you, the task should always be completed sooner rather than later, and for a smoother experience when tax season comes around, here is some guidance:
Always plan ahead
While small businesses that have been set up as S corporations typically have a tax deadline of the 15th of March, sole proprietorships, single-member limited liability companies or C corporations, must usually file before the 15th of April.
So, begin by knowing when your deadline is, and then you stand a much better chance of filing on time. Of course, if you’re working with an accounting professional, they’ll remind you in good time.
Locate the relevant forms
Different business types use different tax filing forms, and knowing which ones are relevant to you and your business early on in the process, will always be helpful since it will advise you of the correct documents and information to have ready.
Below are some of the forms used by businesses when filing their taxes:
- Schedule C – for sole proprietorships, along with their personal 1040 tax return
- Form 1120 – for C corporations
- Form 1120-S – for S corporations
- Form 1065 and Schedule K-1– for partnerships, and individuals within a partnership
Gather your financial records
If you haven’t kept meticulous records over the previous year, than this step in the process can be an arduous and time consuming one. You’ll need to set aside time to locate and organize your income records, including gross receipts from sales and any interest or investment income from accounts held in the business’s name. You’ll also need to gather receipts and other documentation of business expenses that might reduce your businesses taxable income.
Gathering up all the necessary financial documentation is best carried out in advance, and is always worth investing time in, as it will help to ensure a more accurate tax return.
Seek help from a tax professional
Most business owners who don’t have a background in finance, choose to work with a tax professional, and those that do can relieve the stress associated with all of the points listed above. However, you should still engage with your tax professional early on enough, so that neither of you are forced to rush to gather the necessary documentation in order to meet the filing deadline.
A tax professional not only lessens the business owners tax burden, but they’ll ensure that any new tax laws that might affect your filing, are adhered to appropriately.
So, to reduce your tax burden and your chances of being audited by the IRS, meet with your tax professional well in advance of tax season (three to four months is usually ideal), and then schedule a final meeting closer to the tax deadline to tie up any loose ends and ensure that all of the necessary documentation and forms are ready.