As a small business owner, staying organized for tax season is something that requires your attention all year long. Waiting until the last moment to get your files in order could mean costly mistakes and fines. Preparing your business for tax season is something you should do gradually all year. It can seem like a daunting chore, but we have created a short guide that breaks down these tasks into a manageable year-round calendar.
Organize All Receipts
When it comes to business receipts, the most important thing is to remember what the receipt was for. We recommend getting into the habit of documenting and organizing your receipts on a weekly basis. While this use to be a manual process, you can now scan and document your receipts using your smartphone or a scanner and some software. Receipts should be documented and filed on a weekly basis so they do not pile up.
Some suggested categories include:
|Advertising||Meals||Vehicle & Travel|
|Office Supplies||Postage||Professional Fees|
|Insurance||Dues & Licenses||Charities|
Keep an Accurate Tax Calendar
There are several tax dates that you need to keep up with during the calendar year. Set electronic reminders so that you stay on schedule and nothing is forgotten.
Send W-2 Forms and 1099 Forms to employees and independent contractors who provide services.
Gather and file any W-4 forms that employees submit for exemptions.
File Form 1099 with the Internal Revenue Service.
File Form 1120 for the calendar year and pay taxes, if applicable.
Pay individual income tax, interest, or penalties due.
If you were given a six-month extension, then you file your business taxes.
If you were given a six-month extension, then you file your business taxes if you are a C corporation.
Set Money Aside for Taxes
It is important to put money aside to pay your taxes. Most experts recommend that you save at least 25% of your business’s net income. The best way to do this is to set up a separate savings account so that you do not get tempted to spend that money in your primary business account. You can automate your deposits into this account so that the money is set aside gradually throughout the year.
When you get ready to pay your taxes, your accountant can simply transfer the money from your savings account to the IRS to pay your taxes. Having a separate account makes it easy to keep up with what you have paid out to the IRS. It also simplifies your accounting.
Use a Cloud-Based Accounting Service
In today’s business world, the only way to operate efficiently and compete is to make a digital transformation in as many areas of your business as possible. Doing so will save you time and money and simplify all of your organizational processes.
Going with a cloud-based accounting service is no different. You can manage your entire portfolio from a shared platform that grants access to your accountant, business partners, employees, or any other authorized user. You can download and upload documents, check your accounts, collaborate with your accountant, and keep your most private documents safe. You can also access your cloud platform from any device in any remote location.
Schedule Regular Meetings with Your Accountant
Your accountant’s job is to keep your finances organized and to communicate with you regularly on your company’s financial performance. Therefore, you need to communicate with your accountant regularly.
When it comes to taxes, what should you discuss?
- Changes in the tax laws for the upcoming tax season
- When to make big purchases in your company
- How to monitor and track deductions
- Maximizing your tax savings
- Any possible audit or compliance concerns
You should meet with your accountant no less than four times a year or before important tax dates, depending on your business and how you have your finances are set up.
Get a Free Consultation from OPS Accounting
OPS Accounting offers accounting, QuickBooks bookkeeping, payroll processing, & income tax preparation for small businesses in the Chicago area. To find out more about our services, contact us today.