If you haven't filed taxes for your business yet, with April 15th right around the corner, you may be scrambling to file before that deadline hits! Do you have all the right information? Do you just bite the bullet and hire a professional? Did you find yourself unprepared to file this year? What can you do to make tax season less of a headache?
This week, we asked a friend of ours, Dan Hankner of 12 Stones electric, to give us some insight on how to make tax season go by smoothly.
Don’t forget to file quarterly.
- You carry on a trade or business as a sole proprietor or an independent contractor.
- You are a member of a partnership that carries on a trade or business.
- You are otherwise in business for yourself (including a part-time business)
Though it may sound like a lot of work, it’s actually a really good thing for your business. By filing quarterly, you avoid a huge surprise amount of owed taxes at the end of the year. Because the taxes paid each quarter are estimated, you may find yourself with a nice return check when the IRS discovers they owe you money!
Not all businesses are required to file quarterly. For example, if your business generated a net loss of income, has been around for less than a full year, or has earned less than $600, you would file annually instead.
Keep excellent records throughout the year.
When filing as a business, you need to provide information regarding all business expenses and purchases. Knowing what you need to save can help you keep that in mind throughout the year rather than rushing at the end of the year to find all of your previous documentation. H&R Block has created a great checklist to help get an idea of the documents you should be keeping to prepare you for tax season each year.
Look out for deductions.
As a business, the potential for deductions is much greater than as an individual. Even something like recording milage can provide you hundreds of dollars worth of deductions. “[There are] a lot of things that you wouldn't think of as business expenses, from taking clients out to lunch to all the extra stamps you buy from the post office,” Dan noted. Nearly everything you do for your business can be classified as a deduction, so keep that in mind as you’re gathering your records.
Know your limits. Hire a professional.
Ultimately, when it comes to the finances of your business, it’s usually a good idea to hire a professional. In addition to making sure everything is accurate, an accountant can help discover hidden deductions you may not have found on your own, just like Dan’s experience, “A good example is that my accountant advised me from being taxed as an LLC to an S corp, which will save my about $3,000 this year alone - a huge savings that would have been lost to me had I been doing my taxes myself.”
Tax season doesn’t have to be scary. Just remember some of our tips to help you be prepared, and know there are some amazing accountants out there ready to help you file accurately!
Have some tax season success? Give us your tips in the comments below!