As a small business owner, you take on more responsibilities than others. Apart from core business activities, you have to manage administrative tasks. Although these are not income-generating activities, they are essential to the survival of your business.
Small business tax filing is something you have to learn early on. Knowing what you need to do before your first tax season will help you avoid mistakes. It can also help you make important decisions for your business.
Small Business Tax Preparation Checklist
If this is your first time, you have two options. You can either hire tax services specific to small businesses or do everything yourself. If you choose the latter, familiarize yourself with the following steps.
Gather your financial records.
Begin the process by gathering all the necessary documents. Keeping all of your financial records in one place will make it easier for you to check data throughout the process. These documents include:
- Previous year’s business tax return,
- Accounting records (e.g., balance sheets, payroll, income statements),
- Bank and credit card statements
- Your taxpayer identification number
If you’re tech-savvy, you can use accounting software to allot digital space where you can keep all your records for quick and easy access.
Calculate your tax deductions.
Tax deductions depend on the type of business you run. IRS Publication 535 identifies the expenses small business owners can deduct from their taxable income and how to calculate them correctly. The following are some of the most common tax deductions for businesses:
- Insurance – You can deduct 100% of the premiums on your insurance coverage.
- Vehicles – You can deduct expenses related to the cost of owning and operating vehicles used in your operations.
- Offices – You can deduct rent payments if you don’t own your office space. You can also deduct home office expenses as long as you prove that they are part of your operations.
Determine your tax forms.
Small businesses are registered under one of five entities: sole proprietorship, partnership, C corporation, S corporation, or limited liability company (LLC). Each one has different tax forms and calculations.
File your taxes on time.
The IRS penalizes business owners who don’t meet deadlines. Make sure you mark the following deadlines so that you can prepare accordingly.
- Quarterly taxes are filed on the 15th of the following months: January, April, June, and September.
- Annual taxes are filed depending on the type of business you run. The deadline for partnerships, S corporations, and multi-member LLCs is March 15. The deadline for sole proprietors, single-member LLCs, and C corporations is March 17.
Although the IRS can extend the deadline, you shouldn’t count on this. Make sure you start the tax filing process weeks before the deadline to fix any problems early on.
Work with Professionals When Filing Your Taxes
As a small business owner, you need to focus on income-generating activities. You may file your own taxes, but it’s more practical to hire someone else, preferably a professional in the field, to do it. Serenity Financial Services offers reputable and reliable accounting and taxation services to small business owners in Florida.
Get in touch with us to learn how we can help you with tax matters.