The financial year ends on December 31st and many small businesses are preparing to either present their trading records to their accountant or begin the filing process themselves.
This can be one of the most tiring tasks for the small business owner with some spending more than 80 hours filing their tax returns.
However, the tax season doesn’t need to be a stressful time for the business owner. If you begin planning for your tax season early, you will have it easy when it’s finally time to file your tax.
These are some tips for preparing your small trading for the tax season by using creative tax solutions. You can visit flecenterdms to know more about this.
Keep accurate records
Among the most efficient ways to help your marketing prepare for the tax season is to ensure that you keep accurate records. These records should tell you about the expenses, credits, and incomes of the small trade.
It should be easy for you to find the necessary documents and provide them as evidence of deductions and entries for the tax return. You can hire a professional accountant to assist you in keeping accurate records and ensuring legal tax compliance. That way, you worry less about the technical and legal aspects to attain a seamless business tax preparation. Many accounting firms and outsourcing companies offer these services, providing convenience and peace of mind to small business owners.
Also, if the IRS asked to inspect your documents, they should be ready to access at all times. To keep track of all the documents that you need, take a look at the IRS recommended list of documentation.
These include:
- Invoices
- Bank records
- Registered tapes
- Credit card receipts
- Petty cash slips
- The trading credit card accounts
- Professional services fees
- Canceled checks
- Trading receipts for subscription services.
These documents can be safely stored by scanning the hard copies and saving them on the cloud. Make it a habit to save all the business records. Note that even while half of your bills, primarily if you work from home will be paid online. It is still a good idea to keep hard copies of receipts and organize them in a file.
Take note of all the deadlines
The tax deadlines that your small business may be subjected to could be distributed throughout the year. It is thus important to ensure that you are aware of all the due dates. This will help you organize the required records and budget for the tax.
Keep note of both the federal and the state tax deadlines. You can do this by checking the IRS calendar for marketing and the self-employed.
You can consider creating a business calendar to ensure your transactions and activities align with the IRS. For instance, set a target date to complete all orders and deliverables for proper documentation and reporting. Share this calendar in a slide presentation or spreadsheet format with your employees. That way, your employees have a basis when setting goals, processing requests, collecting payments, and other relevant business dealings with customers and stakeholders.
Make use of automated software
If you want to make it easy for your small business to get through the tax season, you need to be meticulous about your records. Different methods have different degrees of effectiveness. Manual systems for one are highly ineffective and can cause confusion when filing returns and when you are trying to reconcile your accounts.
The good thing is that you can easily gain access to different types of automated systems. You can use those to ensure that the trade is well prepared for the tax season.
Inventory is one part that would benefit from an automated system. It will allow you to forecast how many lists you will need for the coming year. Lacking a proper inventory system will cause your business to order more stock than it would need. This is a financial burden on marketing.
Having a poor inventory tracking and management system would result in paying higher taxes. This is because the small business needs to account for the total number of inventory that it has.
Payroll integration is another important part of the marketing which requires automation. It results in a comfortable and smooth record keeping. When filing your small business tax, the wages and salaries paid to the employees are a valuable component. Automation saves you time and effort that could be wasted through long hours of reconciling and calculation.
And to put things into perspective, up to 33% of marketing owners make payroll mistakes which amount to billions annually. What’s more, is that the employees themselves could file a lawsuit against your business for filing their taxes wrong.
Keeping the employees and contractor’s data updated
If your marketing works with independent freelancers and contractors who are not your employees and you have paid over $600, you have to file a 1099-MISC form. You will need the current contact information of the freelancers and the contractors that you use. Also, they will be required to fill the W-9 form.
You need to have a W-2 form for the employees. This will provide accurate details of the wages, as well as other payments and tips that employees have received through the year.
Reconciling bank accounts
It’s also essential to perform reconciliation of the bank accounts. These should be identical to the trade records. Make sure that you go through the files and ensure that every item is accounted for.
Remember that even while you have a bookkeeper, it is crucial to reconcile the bank accounts. For you to notice any errors, ensure that you have fixed these rights away.
Providing the tax professional with documents and records that have not been reconciled will end up costing the trade more money to get them straightened out. Find out effective ways to hire an experienced tax professional from this article on Nerd Wallet.
Make use of end of year deductions
Always ensure that you take full advantage of the end of year deductions. This will help reduce your total taxable income. If you run and operate your trade from home, for example, you can take advantage of the internet and property taxes.
Other deductions include employee salary, business meals, travel expenses, energy bills, and work-related vehicle use. Small business owners can deduct insurance, office supplies, and home office expenses from the tax computation. You can also write off the expenses of hiring professional services, such as digital marketing, legal, bookkeeping, and accounting.
In addition, charitable contributions, child care, and retirement contributions are also considered acceptable end-of-year deductions for a small business. The same holds with employee and customer entertainment and advertising and promotions.
Again, you need to ensure that you have done proper record keeping.
Create a payment plan
There is every chance that you will need to come up with a payment plan. The good thing is that you have several options that you can choose from.
- There is a full-time payment when you pay the entire tax amount at once.
- Then there is the short-term payment plan which you will pay in 120 days or less.
- Lastly is the long-term payment plan where you will pay in more than 120 days.
In the best situation, you will have some savings which you can use to pay for the tax. In case you do not have then you can always contact the IRS to come up with a plan.
