Nothing can make a small business owner break out in a sweat like the fast approach of tax season. Even if you leave the tasks of filing your taxes to the professionals, you still have a lot of legwork to do. Sorting through receipts, checking on old accounts and making sure all of your paperwork is in order. While the entire preparation and filing process is daunting, getting your business ready for tax season doesn’t have to induce panic. You just need to follow a few steps to make sure you have all of your accounts, papers and receipts in order.
If you are a new business, and you have employees, you will need to make sure you have an Employer Identification Number. This also known as an EIN, before you can file your taxes. You can apply online through the IRS website to receive your EIN quickly.
Know your deductions.
Before you begin the process of sorting through your paperwork, bills and receipts, know your deductions. If you are hiring a tax professional, you can consult with him or her in advance to know which expenses you can claim. You probably know that your mileage, office supplies and equipment expenditures are eligible. However, there are many other business expenses you can claim. These include the cost of magazines for your customer waiting area, continuing education classes for you or your employees, and portions of meals purchased as part of doing business. Be mindful that you don’t overdue your deductions. This can serve as a red flag to the IRS and spur an audit. Again, your tax professional should be able to guide you toward appropriate deductions.
Separate your funds.
It can be tempting to use a personal credit card for a business expense because it’s what you have handy. Also, it can be easy to deposit a business check into a personal account. This is because you’re already at your personal bank. In the end, muddling your business and personal funds can turn into a major headache, especially come tax time. Aim to keep your personal and business funds, payments and expenditures entirely separate. If you know you’ve crossed between funds in the last year, make sure you go through your records! Sort out business and personal transactions before you file your taxes.
Make sure your records are current.
While the IRS draws a clear line between January and December for business income and expenses, it’s likely that you don’t. Do you have payments that you haven’t received or expenses that you haven’t updated from last year? Be sure you have all of your income and expense records current and updated. Records that aren’t up to date can make your business income calculation inaccurate. In addition, could have you paying more in taxes than you need to.
For small businesses, filing taxes can be overwhelming. Plus tax laws are always evolving. Make sure you use a reliable, up-to-date tax program or tax information if you file on your own. Or, find a well-respected tax professional in your area to help you navigate filing taxes for your small business!