6 steps to make tax season as painless as possible

Opinions expressed by Entrepreneur contributors are their own.

The first quarter is the beginning of a critical period for companies – tax season. As you know, this can be a busy and stressful time of year for most businesses, regardless of their age, industry or profitability. Nobody wants surprises after applying, so it’s important to start preparing sooner rather than later.

By planning ahead, you will ensure that your business is organized and ready to apply on time. You may never enjoy tax season, but there are ways to make it as painless as possible. Here are six steps to get your business ready – come April 15th.

Related: These 6 tax tips will make tax season easier for your business

1. Prepare all year long

Preparing for tax season starts long before you file your tax return – you should be preparing all year long. This starts with having an accounting system where you can track your finances.

There are tons of free and affordable accounting software options out there, including QuickBooks, Xero, and ZohoBooks. The software is more versatile than anything you can do with an Excel spreadsheet, and most of them give you the ability to collaborate with your accountant.

In addition, companies should pay their quarterly tax liabilities throughout the year. The exact submission schedule will vary by economic operator. Once you set a schedule, you’ll likely find that paying your taxes on time will make your life easier and help you avoid fines or penalties.

2. Make sure your books are balanced

You don’t want to have tax problems due to errors or missing transactions. Make sure all business transactions are recorded and properly categorized. Take the time to reconcile your accounts and make sure your financial software matches your bank account information.

You should also make sure you separate personal and business transactions. Otherwise, you will create yourself a lot of frustration.

3. Collect the documents

Start collecting documents at the beginning of the year. You will need to provide receipts for any deductions you have made in the event of an audit of your business. It’s a good idea to digitize your receipts so you don’t have to worry about something getting lost or damaged.

You will also need the following documentation to present to your accountant:

If you have employees, you must submit Form W-2 to Social Security by January 31.

Related: 5 Steps to Success in Tax Season

4. Check which tax credits you qualify for

Next, you want to see what kind of tax credits your business qualifies for. Tax deductions reduce your taxable income while tax credits reduce your total tax bill. You can search for industry-specific tax credits or see if there are any state tax credits you qualify for.

One of the most favorable tax deductions for financing is ยง 179, which allows you to write off almost the entire value of the equipment purchase on your tax return for the current year.

The IRS provides information on its website about available tax credits and eligibility requirements. It’s a good idea to work with a tax advisor to make sure your business actually qualifies for any relief you’ve identified.

5. Work with your accountant

If you’re in the early stages of building your business, you might be tempted to file your taxes yourself to save money. However, short-term benefits often lead to long-term problems, and most entrepreneurs find more benefits in working with an accountant.

Tax laws and regulations are constantly changing and the average business owner is unable to keep up with these changes. Accountants understand all relevant tax laws and filing requirements and can help you minimize your tax liabilities.

Plus, filing your tax returns can be time-consuming and tedious, especially if you don’t know what you’re doing. Using the services of an accountant will save you time and avoid costly mistakes. Plus, you’ll have peace of mind knowing your company’s taxes are being filed accurately and on time.

There is much more to working with an accountant than tax season; Your accountant can work with you throughout the year to develop strategies to minimize your tax burden.

Related: 3 ways to save money on taxes that most entrepreneurs miss

6. Apply early if you can

April 15 is generally considered a tax day, but the exact filing date varies by business entity. Sole proprietors, sole proprietorship LLCs, and corporations that ended their fiscal year on December 31 must file their taxes by April 15.

But if you’re a partnership, multi-person LLC, or S-Corp and you’re filing Form 1120-S, you must file it by March 15. The IRS starts accepting tax returns mid to late January, so it’s a good idea to file early if you can.

By applying early, you will avoid processing delays with the IRS and save yourself the stress of trying to file at the last minute. If you wait too long for the process to start, you may have difficulty getting along with your accountant.

Arranging an appointment with a tax advisor in advance ensures that you submit your claim on time. Otherwise, you may need to request an extension.

Leave a Reply

Your email address will not be published. Required fields are marked *