Whether you’re in your first year of small business ownership, or your 20th, staring down the face of a looming (and rapidly approaching) tax season deadline can be intimidating. Fortunately, a little preparation, making yourself informed, and knowing how to reach out to the experts can streamline the process so you and your small business can stay ahead of the tax game. Here are our top five tips for becoming masters of small business taxes:
1. Gather ye records
This is the time of year, before tax season really gets down to the wire, when it’s a good idea to go over your recordkeeping for the last year and evaluate what, if anything, is missing. You’ll need bank statements, expense receipts and reports, old tax forms, payroll information, and any documentation to support possible deductions.
Which brings us to the wonderful world of deductions. If there’s any one part of small business taxes that sends many business owners running to a professional tax adviser, it’s deductions. If you make a misstep in this area, it can really end up costing you. Charitable donations, office supplies, utilities, and more…there is a lot to consider in the world of deductions. So our advice: Find a deduction guide, and if you really want to cover your bases, contact a tax guru to walk you through this part.
3. Fulfill your role as an employer
If you have full-time employees, or have used independent contractors for more than $600 in work in the last year, you need to get their W-2 and 1099-Misc forms, respectively, by the end of January. For employees, their W-2s have to accompany a W-3 form for your company, to be filed with the Social Security Administration by the end of February. It sounds like an annoying amount of paperwork to distribute, recollect, and file, but that’s why minding your deadlines is crucial. You can help yourself by keep careful records of employee and contractor contact info, and touching base with them personally to make sure they’re taking care of these tax forms on their end.
4. Tend to your retirement account
Whether you have a 401(k), Roth IRA, SEP, or KEOGH plan, this is a good time to contribute to your retirement account – or establish one if you haven’t yet. Your accountant will have good advice on deciding how much to contribute (in terms of yearly limits and what works best for your business), but however much it is, you have that much less taxable income for the year.
5. Take advantage of free IRS resources
Its reputation as a big, bothersome government institution notwithstanding, the IRS actually does a surprisingly good job of offering up advice and resources for small business owners (and self-employed folks too.) Check out the IRS website to find all the forms you need, find your EIN, and explore a wealth of other tax-related guides.