During year-end, filing taxes remains to be a burden to a lot of small business owners. It might not be an exciting part of owning a business, but filing accurate tax returns is necessary when you run a business. The secret to reducing your worry during tax season: prepare and organize early. The earlier you prepare, the better.

Let us give you some tips to get your small business ready for tax season!

• Automation

We always hear the saying Automation is the future, but then, we also hear that the future is now. Automation is the process of using technology which minimizes manual work and upkeep. Just by the definition itself, you know you’ll want to jump aboard it! It helps you save not just manual labor, but also a lot of time, which most business owners need. Your records must be complete and meticulously kept for you to be ready for the tax season. Also, with different automated software, you can easily deal with the different aspects of your business finances like your inventory and payroll. Automated software is reliable for more accurate financial information, leading you to a more stress-free tax preparation experience.

If you are still using spreadsheet for tracking your income and expenses, it is time to move from this tedious manual work and consider accounting software such as QuickBooks Online. Your time is precious and should not be wasted creating and updating your spreadsheet.

• Be Aware of All Your Tax Deadlines

As a responsible business owner, you should be aware of the relevant dates for your tax deadlines for your business, be it federal or state taxes. Being aware of those dates will help you to keep track of the records you need and also set aside some budget for the taxes that you owe. The IRS has a tax calendar containing the details of the thing you need to do monthly in relation to your federal taxes. You can refer to your state’s tax website for your state tax deadlines.

• Collect Records

Your financial information will indicate your income, credits, and all expenses that you will use as the basis for the preparation of your business income tax return. You should be able to have all the proper documentation in order to corroborate your income and deductions. Take note that your records must also be available for audit, should your income tax return be selected for IRS examination. You must also keep your previously-filed returns, along with your other records such as bank statements, credit card receipts, invoices, and all other documents which will serve as your supporting evidence. In addition to the hard copy, it would be helpful to have your documents kept electronically.

There are many different types of software available that you can choose from in which you can take a photo of your receipts and save this to your own account which you can retrieve later on as need arises (e.g. your income tax return has been selected for IRS examination). It is worth researching the best software that will work for you and fits your budget.

• Deal with Difficulties Immediately

There might be times that you discover that an important document or a piece of critical information is missing. It would be easy to think to tackle the problem later, thinking you may have ample time, but it is better to deal with them head-on. This is where it is good to consider hiring an independent professional, like an Enrolled Agent. It’s highly likely that they have encountered this situation before and will be able to advise you on the steps you need to take. They would also be able to assess if it will be better for you to request an extension of filing from the IRS to take the pressure off and give you the time to collect everything you need instead of paying for penalties and interest for late filing.

• Employee and Contractors’ Data Must Be Updated Regularly

There will be times when your business would need independent contractors in addition to your employees. Hence, it is most likely that you will hire a freelancer or an independent contractor. You’ll need to file a W-2 form for your employees to report their wages, tips, and other payments you made to them. You have to ensure that their details are accurate. Also, if you paid a freelancer or an independent contractor of $600 or more, you must issue a 1099-MISC form for them. Beforehand, you have to ask them to complete a W-9 form to request for their tax information.

If you need help regarding your bookkeeping or tax preparation needs, contact us today at admin@fas-accountingsolutions.com or 832-437-0385.