The tax filing season has begun, and depending on your business’ tax year and type of business/corporation, the deadline for filing your return could be March 15 for S corporations and partnerships meeting the first deadline, to Oct. 15, for those have filed an extension. If your business is getting ready to file your return, these practical tips can help you get a handle on your taxes and your overall business finances during tax season and beyond.
“Preparing for tax time can be especially stressful for small business owners,” Mechele Agbayani Mills, President and CEO of BBB Serving Central East Texas said. “Staying up-to-date on new legislation can help prevent costly penalties from failure to comply with regulations impacting your business.”
BBB provides the following tips:
Know your federal and state tax obligations. Requirements vary by state and can change depending on the structure of your business, so you’ll need to do some research and find out how to calculate your state and federal taxes. The IRS Small Business and Self-Employed Tax Center and USA.gov’s Small Business Tax Information can help you determine what federal taxes you owe. Information about state taxes can be found on your state’s Department of Revenue website.
Understand employment taxes. Employment taxes include Social Security and Medicare taxes, federal income tax withholding, and federal unemployment (FUTA) tax. To learn more about these, see the IRS article on Employment Taxes for Small Businesses.
Find out when taxes are due, ahead of time. Scrambling to make a payment just before its due date is stressful, and you may incur a penalty for late payments. Avoid the stress by learning when your taxes will be due and plan ahead to make the payments on time or early. The IRS tax calendar can help you keep track of when payments are due and can even send you email reminders a week or two in advance of payment due dates.
Understand which business-related expenses can be subtracted from your taxable income. The amount you will have to pay in taxes generally depends on how much your business has earned after qualified expenses have been deducted. The items and percentages which can be deducted change periodically. Go to irs.gov for the most up to date information, and remember to save your receipts.
Take a year-round approach to taxes. It’s tempting to forget about taxes the moment the due date passes, but creating good habits throughout the year will help you avoid the stress of struggling to get all your paperwork and payments together last minute. Make an effort to track your expenses, digitize receipts, and invest in software to improve your record keeping and facilitate accurate tax payments made on time.
Hire an accountant. Hiring a qualified accountant or tax preparer is a wise business investment that can help your business thrive and even save you money in the long run. The National Foundation for Credit Counseling (NFCC) says, “Seeing as you don’t necessarily need to have your accountant on staff full time and can instead pay them solely for their services, there is no reason not to seek an expert to prepare your taxes and educate you on how best to align your business finances.”
Watch out for scams. Con artists have come up with a number of tax scams designed to cheat you out of your money or steal your business identity. Always guard your sensitive tax, business, and personal information carefully and get to know how the IRS works to avoid being fooled.
For more ways to keep your small business running smoothly, see the BBB Business HQ page. Also see BBB tips for hiring a tax preparer. To watch the most recent BBB Hosted Tax Update Presentation, go to our YouTube channel.