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The first quarter marks the beginning of a critical time for businesses: tax season. As you know, it can be a busy and stressful time of year for most businesses, regardless of their age, industry or profitability. No one wants surprises after they apply, so it’s important to start preparing sooner rather than later.
Planning ahead ensures that your business is organized and ready to file in time. You may never enjoy tax season, but there are ways to make it as painless as possible. Here are six steps to ensure your business is ready — starting April 15.
Related: These 6 tax tips will help make tax season easy for your business
1. Prepare all year round
Preparing for tax season starts long before you’re ready to file your tax return — you should be preparing all year long. This starts with having an accounting system where you can keep track of your finances.
There are plenty of free and low-cost options when it comes to accounting software, including QuickBooks, Xero, and ZohoBooks. The software is more comprehensive than anything you can do with an Excel spreadsheet, and most allow you to collaborate with your accountant.
In addition, companies would have to pay their quarterly tax obligations throughout the year. The exact filing schedule depends on your business entity. Once you’re on track, you’ll probably find that paying your taxes while you’re at it makes your life easier and helps you avoid fines or fines.
2. Make sure your books are balanced
You do not want to run into tax problems due to errors or missing transactions. Make sure all your business transactions are recorded and accurately categorized. Take the time to reconcile your accounts and make sure your financial software matches what your bank account says.
Also, make sure to separate your personal and business transactions. Otherwise you will create a lot of frustration for yourself.
3. Collect your paperwork
Start collecting your paperwork at the beginning of the year. You must provide receipts for all deductions you made in case your business is audited. It’s a good idea to digitize your receipts so you don’t have to worry about anything getting lost or damaged.
You will also need the following documentation to bring to your accountant:
If you have employees, you are required to file W-2s to the Social Security Administration by January 31.
Related: 5 Steps to Tax Season Success
4. Check which tax credits you are eligible for
You then want to know which tax credits your company is eligible for. Tax deductions lower your taxable income, while tax credits lower your overall tax bill. You can search for industry-specific tax credits or see if there are any state-specific tax credits that you qualify for.
One of the most beneficial financing tax deductions is Section 179, which allows you to write off almost the entire value of the equipment purchase on the current year’s tax return.
The IRS provides information on available tax credits and eligibility requirements on its website. It’s a good idea to work with a tax advisor to make sure your business actually qualifies for any credits you identify.
5. Work with an accountant
If you’re in the early stages of building your business, you may be tempted to file your taxes yourself to save money. However, the short-term benefits often lead to longer-term problems, and most business owners find greater benefits in working with an accountant.
Tax laws and regulations are constantly changing and it is impossible for the average australiabusinessblog.com to keep abreast of these changes. Accountants know all relevant tax laws and filing requirements and can help you minimize your tax liability.
Plus, filing your taxes can be time-consuming and tedious, especially if you don’t know what you’re doing. Using an accountant saves you time and helps you avoid costly mistakes. Plus, you can rest assured that your business taxes will be filed correctly and on time.
The benefit of working with an accountant extends well beyond 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 Out On
6. Submit as early as possible
April 15 is often considered tax day, but the exact one submission deadline depends on your business entity. Sole proprietorships, single-member LLCs and corporations that ended their year on December 31 must file taxes before April 15.
But if you are a multi-member partnership, LLC or S-Corp and are filing Form 1120-S, you must file by March 15. The IRS begins accepting tax returns from mid to late January, so it’s a good idea to file early if you can.
By filing early, you avoid delays in processing the IRS and save yourself the stress of trying to file at the last minute. Waiting too long to get the process started can make it difficult to get through to your accountant.
Scheduling an appointment with your tax advisor early will ensure that you can file on time. Otherwise, you may need to apply for an extension.