Tax season is upon us – every business owner’s favorite time of year. In order to help you get through it, we compiled a list of the top tips to get your business buttoned up for tax filing, and resources to help you get it done.
According to the Small Business Accounting Report, 70 percent of small businesses outsource their tax prep and of the entire pool of respondents, most feel that their accountants are more reactive than proactive. So how can you get ready and be more proactive, even if you do outsource?
If you haven’t already, decide if you need help. Perhaps you are a new business and this is your first year filing, or perhaps you experienced big growth this year and your tax situation has changed, or maybe you thought you could handle it last year and found it harder than you expected. Either way, now is the time to determine whether you need to outsource an accountant to help you with your taxes.
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Try not to wait until the last minute. Even though it’s an unpleasant task, you should be preparing as you go throughout the year. Keeping organized records of expenses and receipts is critical when you try to claim deductions.
Communicate, communicate, communicate. Your accountant can’t read your mind and likely isn’t next to you when you make purchases, so when you make a purchase, you need to keep record of it or let your accountant know. And sure, you can try to remember and catch up as best you can at the end of the year, but ghost assets will likely appear as a result. A ghost asset is a purchase you intended to keep, but physically goes missing and causes big issues for balance sheets – think: computer, office furniture, etc. inDinero does a great job explaining the implications of ghost assets on small businesses.
Keep track of costs that happen during startup & planning stage vs. operation stage. For businesses in the planning and market analysis stage, you might be able to deduct some costs that are associated with getting your business off the ground. If your business hasn’t “opened” yet, double check with your accountant whether a cost is operational or not. If it is operational, also check to see if you can amortize or gradually reduce the cost over time rather than deduct it outright.
Don’t mess around with payroll. The IRS wants forms, records and dues from each employee – from income tax to social security. Your accountant should be all over this task, but make sure W-4 and all other forms are lined up ASAP once you make a new hire. The Small Business Administration lays out the 10 steps to setting up a payroll system.
There’s an app for that – really. Whether you want somewhere to keep track of your charitable donations or a picture for every single receipt, there is a web or mobile app to keep business owners organized. Small Business Trends pulled together a great list of apps to help assist with all the year-round tasks and planning associated with tax season.
Understand the Affordable Care Act …and its impact on your business. Tax credit is available to small businesses purchasing coverage for employees through the Small Business Health Options Program (SHOP) (potentially up to 50 percent of premium costs and 35 percent for tax-exempt employers). Here is the government’s Tax Estimator tool to help you plan.
Fill out all forms that pertain to your business. First and foremost, whether you are an LLC or a C Corp will impact which form you file (Form 1120 for corporations, or an attachment to your personal filing if you are an LLC). Check out our blog on incorporation differences to learn more.
Other forms are imperative to specific types of businesses, such as 1099-K forms, which online businesses must report from credit card processors. Additionally, many forms exist that small businesses and startups should know about in order to capitalize on tax breaks available to them. For instance, car expenses can be deducted if it is used for business and some employee reimbursements such as travel or food are deductible with Form 2106. And, small employers can take advantage of tax credit if they pay at least 50 percent of their employee health insurance premiums by filing Form 8491.
Here are some helpful resources to read:
- Small Business Association (SBA) – Determine Your Federal Tax Obligations
- SBA – Determine Your State Tax Obligations
- SBA – Obtain Your Federal Business Tax ID
- IRS – Understanding Your Form 1099-K
- TurboTax – What Is Form 8941: Credit for Small Employer Health Insurance Premiums
- US Tax Center – Tax preparation for businesses
Still feeling uneasy? Don’t sweat it – VENTUREAPP is here and ready to tackle any tax issue you encounter. We have a full solutions team ready to help & we can save you money this tax season with the top tax prep & accounting solution providers – just signup and contact us today.
And, for good measure, here are personal tax tips from TurboTax for this year – Tax Tips After January 1, 2016. We’ve got your back.