It’s getting to be that time of year; cool weather, autumn leaves, pumpkin spice everything and… getting your business ready for tax season. The end of the financial year is only a couple months away and the coming hustle and bustle of the holidays can easily cause a mad scramble when December 31st and tax season rolls around.
Getting ready to file your taxes can be one of the most burdensome things you have to do for your business. In fact, a National Small Business Association survey found that one-third of small business owners spend more than eighty hours (two full-time weeks of work) on business tax preparation. Not only will starting on your taxes early help avoid the year-end scramble; it will help you plan for increased deductions and, in turn, minimize your tax burden.
Here are 5 tips to help you get your business tax preparation started:
1) Get organized. Now is a good time to start gathering your documentation. Gather your receipts, invoices, credit card and checking account statements. Make copies of, or electronically scan, paper documents. (Don’t forget easily over-looked expenses like subscription fees to cloud-based services like Dropbox, web-hosting and domain names and shopping service memberships like Amazon Prime or Costco.)
2) Be aware of deadlines. Depending on how your business is structured, you may have deadlines other than those published by the IRS. For example, state and local taxes may have different deadlines that could require you to set money aside and budget for taxes you may owe. Being aware of these deadlines can help avoid costly penalties.
3) Update employee and contractor data. If you have employees, you will need to issue W-2s reflecting wages, tips and other payments you have made to them during the year. Having up-to date contact information will save time. If you have used contractors or self-employed individuals throughout the year, be sure their data is updated so there is no delay in issuing the required 1099s. Reach out and ask them to complete a W-9 form if their contact information isn’t current.
4) Prepare for year-end deductions. As year-end approaches, you should take this opportunity to consider ways to reduce your tax burden. Do you need new computer equipment or office furniture? If so, the cost of these items may be deductible. Can you make a donation to a charitable organization? Depending on your business structure, some donations may be deductible. Are you considering employee bonuses this year? Paying those bonuses before December 31 can also reduce your tax burden.
5) Face any problems head-on. As you go through the process of your business tax preparation, you might find that some documentation is missing or that critical errors have been made. This isn’t the time to look the other way and it is vital that you take care of this situation immediately. If you’re working with a professional bookkeeper, they have probably dealt with this situation before and will be able to help resolve any issue. In any event, as the saying goes, putting your head in the sand will only leave other parts of your anatomy exposed!
Numbers by Victoria offers bookkeeping services and other financial options for individuals and small businesses. Since our services can be performed virtually, we’re able to work with people all over the United States. To contact Numbers By Victoria, or to learn more about our bookkeeping services, please visit: www.numbersbyvictoria.com.