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The Ultimate Guide to Filing Small Business Taxes

Making tax filing decisions might be challenging if you run a small business. Business taxes demand more preparation than personal tax returns, which are filed once a year.

While there’s no right way to file taxes, some best practices can help you stay organized. Whether you file taxes or work with an accountant, these tips will make the process a breeze.

Keep Track of Your Income and Expenses

Keeping track of your income and expenses is the key to accurately filing your small business taxes. Good records will support items reported on your tax return and enable you to claim deductions and credits, which can make your tax bill lower.

Whether you use an accounting software system or an expense tracker app, the key to effective tracking is getting receipts for all purchases. This way, you can reference your receipts to determine the purchase cost and whether it should be considered a business or personal expense.

In addition, keep track of your business expenses periodically, such as monthly or quarterly. This can help you keep your costs down and avoid exceeding your budget in the long run.

A record of all your business expenses is also essential for preparing for an IRS audit. The IRS will examine your business transactions to ensure you didn’t mix your personal and business expenses, which could increase your taxes.

Make Estimated Tax Payments

If you’re self-employed, have an LLC, or are part of a tax-exempt corporation, making estimated tax payments is essential. Generally, you must make quarterly estimated tax payments if you expect to owe $1,000 or more for the year.

In addition, you may need to make estimates if you have employees and owe social security and Medicare taxes. When making your estimated tax payment, keep records of the total amount you paid each quarter and the dates and amounts you paid. This will help you avoid penalties if you’re underpaying.

Estimated tax payments can be made online through IRS Direct Pay or mail. If you need help making payments, contact a qualified accountant to guide you.

Prepare Your Taxes in Advance

Preparing taxes for your business can be stressful, but you can take a few steps to make it easier. By organizing your financial records and understanding your tax obligations, you can reduce your risk of penalties or other issues down the line.

Keep track of your sales and revenue throughout the year to ensure that you can accurately report income on your tax return. In addition, provide your accountant with detailed expense data and payroll records to claim deductions and credits.

Knowing your tax obligations and the deadlines for filing and paying them is essential for a small business owner. Failure to meet these deadlines can result in penalties and interest charges that can add up quickly.

It’s also good to save for your monthly taxes, mainly if your business income fluctuates seasonally or sporadically. This will allow you to make estimated payments and avoid unexpected tax bills or penalties.

Hire an Accountant

Depending on your business structure and financial needs, hiring an accountant when filing small business taxes may make sense. An accountant can help you file your tax return accurately and avoid penalties. They can also help you reduce your expenses and increase your profits.

Today’s accountants are more than number crunchers. They have extensive knowledge of finance and can provide you with business insight to keep your company on the right track. They can advise on the best business structure for you and assist with preparing your financial statements for annual reporting or use in a business plan.

They can also assist with growth transitions, such as hiring employees or moving into larger office spaces. They can manage the finances for these transactions and free up your time so you can focus on your core business.