Did you know that failing to file your business taxes on time can result in a penalty fine of $1,000 or more in the United States?
When tax season comes around you must ensure that you have all of the information you need and resources to get the job done.
If you want to be prepared for the upcoming tax season, there are steps you can take now to help.
Continue reading to discover the best tax tips for small businesses so that you can run your company efficiently!
- Go In with a Plan
One of the best tax tips for small businesses is to make a plan with your team and stick with it.
If you have an accounting department, they should work alongside you while developing a plan. Small business taxes are easy to manage when payroll is being monitored and processed regularly. You should also talk about how you want to record information and file documents that will need to be retrieved.
Make sure that while you are developing a plan, you understand what type of business you fall under so that you can file the correct taxes. Researching this ahead of time will help let you know which documents you will need to file so that you aren’t surprised at the last minute.
- Keep Employee Documents Organized
Another tax tip for small business owners is to organize employee documents after they have been hired.
Each employee should have a completed W2 form. When employees are put on unemployment they will have a 1099-G form that you also must save. It is helpful to keep records of staff members’ pay stubs so that you can pull information about the taxes that were taken out through the year.
Many businesses are keeping electronic copies of these forms to limit having a paper trail. Although this is a good method, you must ensure that the information gets filled to completion. If you have your staff complete their documents on paper, find a filing cabinet that gets designated for this purpose only.
- File Your Receipts
Aside from keeping employee forms organized, you will also want to file your receipts.
When you get receipts through the year buying items that can be written off, you need to keep them in a safe place. Many businesses pay more in taxes because they don’t keep track of these receipts and can’t write the expenses off without proof.
If you have a filing cabinet or drawer, use this space to store receipts. It can also be helpful to organize the receipts based on the types of purchase that they are or in the order that you spent the money.
- Seek Professional Help
If you are looking for business tax tips, a great solution is to seek professional help.
By hiring a Certified Public Account or outsourcing to a tax company, you can trust that your taxes will get done properly. If you don’t have an accountant, https://www.taxfyle.com/tax-preparation-outsourcing can help.
An accountant will have professional experience working with the IRS and not have to conduct as much research. This is because they already have a good understanding of the process and what is needed. IT is also beneficial to get help from a professional because they can help you write off more expenses and help control how much you owe to the IRS.
- Claim All Income
Small business accounting tips are great for preparing for tax season, but they can also prevent you from signaling red flags.
If you want to avoid making a red flag to the IRS, you must ensure that you claim all income. The IRS will receive the 1099-MISC forms and match them to your income to verify if the total amount matches up. If the numbers do not match, you could risk the chance of being audited or having your taxes denied.
Many times, you won’t receive all of the 1099 forms that you send out, however, you are still responsible for reporting the income. This is necessary for both state and federal taxes.
- Separate Business & Personal Expenses
Although it can be tempting to mix in some of your small personal expenses with your business, it is best to avoid this habit.
Mixing in your personal expenses with business expenses can lead to major fines if you are audited by the IRS. All business expenses should apply to your company and you should be able to justify their purpose.
Putting your gas receipts for work on your business expenses, for example, can lead to trouble. Espeically if you live close to work and aren’t traveling each day. The best practice is to get separate bank accounts and credit cards for your personal expenses and business.
- Manage Payroll Through the Year
Accounting and payroll issues come up throughout the year and should be immediately addressed.
Not keeping track or fixing these issues can leave you unprepared for when you need to file taxes or without important information. Your accounting team should be checking for accuracy on pay stubs at the end of each pay period.
It can also be helpful to conduct internal audits for your business. This will help ensure that your company is abiding by all of the rules and filing information correctly. If you notice that something is off during your internal audits, you will have the chance to fix it before the IRS becomes involved.
Follow These Tax Tips for Small Businesses
When it comes to tax season, you can never have enough tax tips for small businesses to help.
Taxes can be an overwhelming task to get through, which is why you must prepare for them ahead of time. The sooner you can get your documents and finances in order, the easier it will be to file forms on time.
Many businesses fail to file their taxes on time, often due to a lack of knowledge or organization. Don’t get tripped up this coming year when dealing with the IRS.
Be sure to check out our blog for more articles about small business accounting and running your company efficiently!