Top Tax Preparation Tips For Small Businesses
June 10, 2016
Okay, so small business taxes might not be a subject we want to linger on, but for those of us out there who know that this same subject is going to keep coming around, year in year out, we may as well learn what we can in order to try and simplify the process and ensure that when it is tax time, we have to spend as little time preparing for it, as possible.
So as a small business owner preparing your taxes for the first time, what are some of the top tips?
First of all, be aware of when your taxes are due!
Most owners of small businesses file their business tax returns along with their personal returns, and so it would stand to reason that the due date for business returns would be April 15th, the same as the deadline for personal returns.
Know what type of business you own
If your small business is not a corporation, then it will either be a sole proprietorship, a partnership or a limited liability company. Whichever type of business yours is, will determine which forms you will need to fill out at tax time.
Determine what documents you will need to prepare your return
You will need to have some financial reports and various other documents at hand when preparing your tax return, which will include an end of year loss and profit statement and a balance sheet for the beginning and end of the fiscal year.
Remember that you will have to pay self-employment taxes
For small business owners, social security and Medicare taxes must be paid at a percentage of your earnings from self-employment.
Don’t let audit traps trip you up
Tax return time is always made more complicated by tax audits, and whether you believe the chances of your business being in the spotlight or not, it’s wise to try and avoid making any mistakes that could lead to questions being asked at tax time. A prime example of a common slip up when filing tax returns, is to misclassify employees, something which can be seen as a direct attempt to avoid certain payroll taxes and can result in penalties. For instance, classifying an employee as an independent contractor could be red flagged by the IRS.
Apply for an automatic extension for filing your tax returns
For small business tax returns, an extension of six months can be applied for, making the due date October 15th. However, take note that this extension doesn’t apply to the payment, only to the filing time, and your estimated taxes must still be paid by the due date in April.
For peace of mind, hire a tax return professional
If the many rules, regulations and worries of fines are taking up too much of your valuable time, why not give yourself the peace of mind of hiring a tax return professional? With their intimate tax preparation knowledge, you won’t have to lose a wink of sleep over your taxes, and they could even end up saving you money that you might otherwise have lost in penalties or misfiled information.