Tax preparation. Those two words can cause anxiety and bring fear and trepidation into the hearts of many small business owners. After all, tax preparation isn’t particularly pleasant, and every minute spent on this function is a minute diverted from income-producing and business-building activities.
At the same time, accurate record-keeping and tax filing are critical functions that enable and protect the very life of a company. So, fear not. Review some important small business tax info and forms that are required and get this process going smoothly.
Best Tax Preparation Practices
Here are some key practices that will put tax preparation on the right path:
First and foremost, make sure that accurate records are being kept throughout the year. Improper or inadequate record-keeping can result in leaving money on the table, or worse, lead to a troublesome audit.
Second, make sure that your business entity is correctly classified because the business classification can have a significant effect on your business taxes. Consult with an attorney and a professional accountant to determine the right classification for your business.
Third, make sure that all business expenses are separated from personal expenses. Comingling money and documents will quickly lead to an audit and call for an inspection of your personal accounts.
Fourth, be sure to claim all income that is reported to the IRS.
Last, and also critically important, get professional accounting assistance and consult with them regarding your business plan. Get good advice on how to grow your business. Professional accountants will know all the latest accounting and tax rules and regulations. They’ll have all the right small business tax info and forms that you will need.
Tax Preparation Checklist
Here’s the list of small business taxes info and forms to pay attention to:
- Find out and make a list of all tax-related actions and when those will be due. Sole proprietorships use Form 1040, C corporations use Form 1120, S Corporations use Form 1120-S, and Partnerships use Form 1065 along with a Schedule K.
- Collect all business records regarding and related to income including gross receipts, returns, and all investment income.
- Assemble all documentation for business expenses.
- Send out the required information forms and ensure that you receive the ones that you need. For employees, W-2 forms must be sent out by the end of January. Businesses will need to receive information such things as interest paid on loans, rent paid on a rental property, and fees paid to outside service providers.
- Get an extension if you need one. An extension must be filed before the original due date of the tax return to be filed. Then, be sure to pay your taxes on time.
- Based on what you learn this year, make changes and improvements to your processes and records to strengthen the work going forward.
Small Business Tax Mistakes to Avoid
If you carefully follow the small business tax info and form tips and get professional assistance, you’ll avoid these tax mistakes:
- Deducting start-up costs incorrectly.
- Selecting the wrong business entity.
- Incorrectly classifying staff vs. independent contractors.
- Making mistakes on the payroll.
- Forgetting the value of small items.
- Not realizing the limitations on deductions.
Get Expert Accounting and Financial Assistance
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting, financial assistance, and tax preparation that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.
