10 Tax Season Preparation Tips for Small Businesses

It’s that time of the year again: If you’re a small business owner, you need to get started on your taxes as early as possible. Here are ten tax season preparation tips for small businesses that can help you meet your deadline and make the most of your deductions.

1. Start Early

As a small business owner, you simply don’t have time to wait until tomorrow to get a jump on your taxes. The sooner you start, the better; if you hit a roadblock, you’ll have time to find a financial professional to help.

2. Gather Financial Documents

Start by pulling together all of your financial records. These will include business reports, tax forms, and any receipts that you’ll use to claim deductions.

3. Double-Check Your Business Classification

Your company’s legal status (sole proprietorship, LLC, etc.) directly impacts your tax preparation and liability. Make sure that your business is registered as the correct entity.

4. Make the Most of Deductions

Any business owner can deduct qualifying business expenses from their tax return. This includes deducting a percentage of your rent or mortgage if you have a home office. Look into other tax deductions, such as those specific to your industry.

5. Make Sure You Match Your 1099-MISC

The 1099-MISC enables the IRS to match your reported income against the income you’ve received. Always report your income accurately to avoid an audit.

6. Don’t Confuse Net and Gross Income

You owe tax on your net income, which is the amount you make after deducting expenses. Make sure to document every expense so that you pay taxes only on the net income that your business has generated.

7. Keep Up With Tax Changes

Federal and state tax codes change frequently. For instance, states can shift the amount of unemployment tax that business owners must pay. Keeping up with these changes ensures that you comply with federal and state laws and avoid underpayment penalties.

8. Hire an Accountant

An accountant can help you prepare your financial statements and sort through your taxes each year. They can also provide counsel on the best way to maximize your deductions. The best accountants will advise you year-round on tracking your finances and planning for the next year’s taxes.

9. Consider an Extension

If necessary, you can always file an extension with the IRS using Form 7004. This will extend your filing deadline by six months (until October 15) with no penalties. Others might consider an installment plan to pay their tax debt over time.

10. Plan Ahead for Next Year

Planning ahead for next year can keep you organized and in control of your business finances. For instance, planning your expenses can help you take advantage of tax deductions the next time tax season rolls around.

Get Help for Your Small Business

STG Accounting can assist with tax preparation, planning, and much more. Are you ready to learn how we can help your small business? Contact us today!