Tax filing season is here and it’s important to be prepared in order to file taxes properly and in a timely manner. The National Small Business Association reported that last year, 30% of small business owners spent at least 40 hours each year on their federal taxes. Below are several small business tax tips to help you get prepared for tax season.
Federal and State Income Taxes
When filing taxes, it is important to determine your federal and state income tax obligations. The type of business you have (sole proprietorship, partnership, LLC) will determine which income tax return form(s) you must file. State tax requirements vary depending on where your business is located. If you’re not sure what needs to be done, check out the U.S. Small Business Administration’s information on how to determine your state tax obligations.
Maintain Business Records
It’s important to always be organized throughout the year. Keeping all records and receipts systematized will help relieve stress during tax season. TurboTax suggests organizing your tax forms into categories. Keep anything related to income, like W-2s and 1099s together. Then make sure to save business receipts for expenses in a safe place.
Small business tax tip: Continuously maintain your business records and catalogue them properly.
Know Your Deductions
There are many activities a business does throughout the year that can be claimed as a tax deduction. Did your business make a charitable contribution? The IRS website explains; donations for a qualified organization can be claimed, but contributions made to specific individuals, political organizations and candidates cannot be deducted.
Small business tax tip: Know the importance of understanding possible deductions and how to claim them properly.
Personal vs. Business
Make sure to maintain separation between your personal expenses and your business expenses. Keep separate bank and credit cards
Ask A Professional
When in doubt, ask for help. For the 2018 tax season, 585 million people visited the IRS.gov website. According to the survey mentioned earlier by the National Small Business Association, 68% of small business owners use external tax practitioners or accountants to prepare their taxes.
Because federal and state tax laws change frequently, it can be helpful to have someone on your side who will be up to date on any changes.
Small business tax tip: If you’re having a hard time filing your taxes or if you have questions, hire a certified public accountant (CPA). CPA’s specialize in knowing the federal and state tax laws and can help you understand your business better.
In order to have a successful (and less stressful) tax season, make sure to get organized, ask questions, and understand what is needed from your business to file.
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