When dealing with things such as tax returns, it’s highly recommended to get everything ready ahead of time. Start doing financial legwork as soon as possible because you need enough time to gather and organize the documentation. Make sure that crucial information does not slip through the cracks and fill out your business income tax return properly. Note that small mistakes such as typos can lead to big problems like tax return delays, so get organized and ready to face the dreaded tax season.
Pieces of the puzzle
First off, you need to file the correct tax form in accordance with your business structure. Namely, sole proprietors, single-member LLCs, S-corporations, partnerships, and multimember LLCs report business income and expenses on different forms. In general, business owners are obliged to provide basic information such as social security number, legal name, address, etc. Thus, it is time to assemble all those reporting and bookkeeping documents, including journal entries, profit and loss statements, and balance sheets.
It’s highly recommended to keep all your expense receipts because you must possess necessary documents related to all expenses your business has. Merely presenting accounting software entries and bank statements does not cut it. Thus, maintain detailed copies (electronic or otherwise) of bills, receipts, canceled checks, etc. The goal is to provide evidence of the business expenses for the minimum of six years. Pay attention to areas like travel and entertainment because institutions like the IRS keep a close eye on those.
There are different tax forms, and for each one, you should check if the information matches your own records. In case you have a business checking or savings account, you also have to add your interest income. Furthermore, collect records of all assets you have purchased or sold during the year. It’s necessary to calculate the gain or loss on a transaction based on a cost of an asset as well as the date of purchase or sale. Finally, do not overlook records for charitable donations.
Furthermore, business people are allowed to either itemize personal deductions or claim the standard deduction. In any event, do not miss out, make sure you claim deductions for small businesses, such as a home office deduction. Likewise, car deductions are common for small business owners. On the other hand, self-employed people can count on health insurance premium deductions. Check whether you are eligible for these and provide necessary documents as needed.
Seek help and support
This may sound like a lot to take on, but professional tax preparers can help you stay on top of all the requirements and make you come out of the process as right as rain. It’s estimated that around 60% of business owners use these professionals and services for completing and submitting tax returns. Similarly, some companies rely on business tax planners and accountants such as this tax consultant in Sydney. This is a surefire way to maximize the refunds.
Just bear in mind that the right choice of a preparer is paramount to your efforts. Ask friends, colleagues, and advisors for referrals and do the homework. Inquire about the fees and avoid those who would like a share of your refund. Schedule an appointment and have an open conversation. Once you reach the decision, supply the preparer with all the necessary information and complete the questionnaire carefully. All the effort and time you invest in the process will be worth it once the tax time finally arrives.
Grab the umbrella before the rain
Tax season does not have to bring doom and gloom to your organization. Embrace a proactive approach to take stress and frustration out of the process and minimize potential losses. Brace yourself for what is to come, start the prep work early on, and use easy-to-follow tax checklist as your guiding light. Regardless of whether you handle this yourself or hire preparers, get your receipts together, cover all the bases, and ensure a smooth and successful tax return experience.