6 Tips For Prepping Your Business For Tax Season
No business finds doing their taxes enjoyable, but the process is necessary. Here are some tips for getting your business ready for tax season to help you better understand the complex world of filing taxes.
1. Make sure your business is registered with the IRS
Before you can do anything else, it’s absolutely essential that your business is properly registered with the Internal Revenue Service (IRS). This is done with what’s called a Federal Tax Identification Number (EIN), which can be applied for either online or over the phone.
If your business isn’t registered with the IRS, you can’t file taxes. It’s as simple as that.
2. Create a list of all of your assets and liabilities
Once you receive your EIN, it’s time to create your balance sheet. This will act as your starting point for everything else, so take your time and make sure to list every asset and liability that you can think of.
3. Check to see if you have any outstanding liabilities on your balance sheet
Now, go through this list again with a fine-tooth comb, checking for any liabilities (loans, credit cards, etc.) that might be unpaid at the moment. You can then reference your credit report as a shortcut. Pay close attention to the status of your accounts – if anything is labeled “past due” or “charged off,” you’ll need to get them paid before tax season rolls around.
4. Get an accountant or tax professional to help you file taxes
This one might seem like common sense. However, you’d be surprised at the number of people who try to file their business taxes on their own.
With things such as sales tax filing, an accountant or tax professional can make the process much easier.
You can also get their advice on any changes you might want to make with your accounting practices in order to save money when filing your taxes.
5. Keep all receipts for expenses incurred during the year
Regardless of which path you choose, it’s important to keep every receipt related to business-related expenditures. This includes mileage, travel costs (if you traveled for business purposes), and even the cost of your home office. It’s easy to forget about little things like this, so go through everything now so you don’t miss any deductions come tax season.
6. Don’t forget about deductions – they can lower what you owe in taxes significantly!
Finally, and perhaps most importantly, don’t forget to claim any and all tax deductions that you can possibly think of. There’s a long list of things that qualify as business expenses, including transportation costs, marketing fees, the cost of your cell phone used for work (if it’s not already included as part of your plan), and even some food-related deductions.
There are many things that can be claimed, but if you’re unsure of anything, consult with an accountant to make sure you’re not leaving any money on the table.
Some commonly overlooked business tax deductions include:
– Home office expenses
– Business travel deductions
– Cell phone deduction
These are just some examples, but there’s an almost endless amount of business tax deductions that can be claimed. While not all will apply to you, it’s always worth consulting with a professional accountant to make sure everything is covered.
In the event that your tax bill ends up being lower than expected, you can always save the difference in case of future expenses. This is a great way to keep some money on the side for emergency purposes.
Follow these simple steps and you’ll be well on your way to a smooth tax season. Once you’re done filing, sit back and relax knowing that sooner or later (hopefully sooner) it will all be over!
Best of luck with your taxes!