This time of year strikes fear in the minds of business owners and individuals everywhere. It’s the dreaded tax season. By now you’ve sent out your Form W2’s and your employees are already filing away, searching for as many deductions as possible. For your business though, the deadline for filing taxes looms ahead. As you start gathering invoices and financial statement, there are a few things you should keep in mind.
The first mistake most business owners make during tax season is filing incorrectly. How you file has a major impact on the types of taxes you pay and the types of deductions you are eligible for. If this first step is done incorrectly, your business will most likely end up paying more either through higher tax rates or IRS fines and penalties. So what forms are you supposed to file? A Schedule C, an 1120-S? In order to answer this you need to define what type of business you run. Take advantage of the information available on the IRS website. There, you will find a list of the various forms you need based on your business type and can help you understand what each means.
Once you have the right forms in front of you, you want to make sure you have all the documentation you need to fill them out, including financial statements. How well this process goes depends completely on how organized you are. We’ve all heard of (or been) that person who’s filing system is just a stack of papers. Do yourself a favor and keep systematic records. An automated expense system and regular, accurate reports will help you monitor and track your finances more efficiently. Not only will this make filing your taxes easier, but should you be audited, the process will be quick and painless.
Even with the information about which forms are needed and a well-organized filing system, taxes can still be largely overwhelming, even for the most experienced business owners. Talking with a tax preparer or a financial advisor is a good idea for anyone. With the help of an expert, you ensure that everything is being filed correctly, and you may even be able to identify hidden deduction opportunities. Tax season doesn’t have to be a headache. You just need to have the right information and prepare yourself and your business ahead of time.