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Each year, approximately 627,000 small business owners open their doors and start helping clients and customers for the first time. While the process is exciting, it does bring new challenges into the mix.
Not only are you in charge of a company, but you’re also responsible for overseeing and filing your small business’s taxes.
If you’re wondering how to file small business taxes right now, you’re not alone. Here’s what you need to know to get things done right.
Before you can start filling out this years’ taxes, you’ll need to get your documents together. You’ll need to have your employer identification number, your personal social security number, any financial statements for the year, and documents proving your expenses.
If your company was up and running last year, you’ll also want to find your previous years’ tax returns. That’s why you’re supposed to hold onto your returns for at least a few years after you file.
Should those documents go missing at any point in time, you can always request a copy of your previous returns from the IRS. Try to do this in advance as it can take the IRS a while to process your request.
Every business owner should have a good bookkeeping system in place. This is what allows you to track your profits and losses and stay on top of your operating expenses.
It’s normal for bookkeeping to fall behind toward the end of the year, but you’ll want to get things in order before you start trying to file your small business tax return. If you don’t take the time, you’ll end up making the filing process far harder and more time-consuming. Here’s what you need to do:
Discrepancies happen, but they can dramatically change how much you end up paying the government. If there’s a mistake on your return, you could end up facing an IRS audit.
Run through your records and make sure they line up with your bank statements. If you find errors, correct them, and use the updated information to file your return.
You should already have financial statements that outline your expenses, your profits, your losses, and your yearly income. Make sure those statements cover the full year and set them aside.
You’re able to deduct a portion of your business’s regular expenses from your taxes, but you’ll need to prove that you spent the money the way you claim. Put together your receipts or scan them onto the computer to create digital copies.
Think about how you structured your business. This will determine which types of tax forms you need to file with the IRS.
The forms are very specific and you can’t swap them out for another form without causing serious delays on your tax return. If you’re not sure which form you need, don’t hesitate to speak to the IRS. They’ll help you find the exact forms for your business.
Remember, it’s always better to take a little more time to find the right form than it is to choose one that will cause the IRS to reject your return.
The key to filing small businesses taxes quickly and easily is to separate your personal finances from your business from the very beginning. This helps eliminate confusion and makes keeping track of your expenses and income much easier.
Further, it helps reduce your risk of IRS audits in the future.
If you haven’t already created a business checking account, do so immediately. While it can’t help you much for this tax season, it will make future filings easier.
Then, go through your documents and try to make a note of which expenses came from your business, which ones are personal. This will help you guarantee that you report the right amount of income for your company.
You’re responsible for sending out employee tax forms to every person that worked for your company throughout the year. This includes full and part-time employees, contractors, and temporary workers.
If you have an established payroll system in place, this should be easy enough. However, if you don’t, you’ll want to use a pay stub generator to create the necessary documents.
The more deductions you can take, the more money you’ll save on your total tax liability. Use this to your advantage and claim as many deductions as you can.
The deductions you’ll be able to claim will largely depend on your business and the types of expenses you incurred. However, most companies can deduct things like equipment purchases, standard banking fees, advertising costs, and even portions of their building’s rent.
Just make sure you have the receipts or statements on-hand to back up those deductions.
If you feel overwhelmed with filing business taxes or have questions about your small business tax rate, don’t try to handle everything on your own. Instead, contact a local accountant and let them help you through the process.
Accountants are experts in the tax code and can often identify ways to save you money in the long-run. Even if you don’t use them in the future, getting a professional to help you during your first few years can take the stress out of filing.
If you’ve been wondering how to file small business taxes and find yourself feeling stressed about the process, take a deep breath. Start gathering your documents as soon as you can and take your time when entering information.
This will help you avoid making mistakes and gives you a chance to learn without dealing with a deadline crunch.
Looking for a few more tips to streamline your business and improve your administrative process? Check out our latest posts.
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