If you want to run a lawful business, you must pay your taxes. Businesses that keep a close eye on taxation policies and updated laws are more likely to file their tax returns successfully within due dates. On the other hand, businesses that don’t keep up with their taxes are likely to land in trouble with the IRS. This can lead to heavy penalties and possibly also business closure.
Taxation can be complex for anyone unfamiliar with the basics, but preparing for D Day by streamlining a few routine business activities can make the process more straightforward. Try the below-mentioned tips:
Maintain and gather your financial records
The foremost step to getting started with filing taxes and returns is to analyze and gather documents that need to be submitted. The collection of important records is a lengthy procedure and demands your attention. You must not wait for the deadline to be very close since you are likely to miss out on something important. Instead, begin preparing as early as possible to avoid making mistakes later.
Crucial documents you’ll need include your business’s balance sheet and income statement. These are crucial documents that outline the financial health of your business. Other supporting documents include payroll records, receipts, bank statements, and credit card statements you need to prepare for an audit and additional calculations. A record of tax returns for the last five years helps file current tax returns.
Consult a professional
Consulting an accountant who’s prepared with the help of Wiley CPA Review and acquired a certification can help you overcome several hurdles you might face. Certified public accountants are familiar with tax laws and can help you make sense of financial statements and records. With a professional helping you out, you are less likely to make mistakes while filing your papers. Tax accountants will also identify where you could save money during the entire process.
Understand different tax forms and applicable deadlines
The structure of your business entity decides the tax form you need to file. For instance, use Schedule C if you own an LLC as a single member or a sole proprietor. You can attach it to your Form 1040, which is your personal income tax return. In the case of a multi-member LLC or a partnership, you must use Form 1065 with Schedule K-1. Other tax forms are Form 1120 and Form 1120-S for corporations and S corporations, respectively.
Know the deadline
The last date to file your tax return depends on your business’s structure. For businesses operating in the US, two dates, April 15 and March 15, are crucial to remember. Single-member LLCs, multi-member LLCs registered as corporations, sole proprietors, and corporations with their tax year ending on December 31 must file a tax return by April 15. It is also applicable for personal income tax return filers. On the contrary, the last date for multi-member LLCs, partnerships, and S Corps to file a tax return is March 15.
Get to know tax credits and deductions
When you’re done recording essential financial data for tax purposes, remember to look for tax breaks before filing your tax return. You can benefit from tax credits and deductions that apply to the nature of your business. Your expenses might qualify you for tax exemptions and deductions.
Disables access, work opportunity, and small employer health insurance are some tax credits your business may apply for. Business tax credits usually promote mutual benefits for employers and employees. In this case, employers take measures to accommodate workers and avail tax credits.
In addition, your business can claim tax deductions if it makes expenses for a home-based office, charities, travel, etc. The IRS demands businesses meet certain requirements to get tax deductions. You must fulfill the criteria set up by the regulatory authority to claim tax credits and deductions. Furthermore, ensure that your financial data and records are updated to justify your tax credits and deductions claim.
Explore different options if you fail to file a tax return
Sometimes, you may get overwhelmed with business matters, or the financial health of your business does not allow you to file tax returns within the due date. Regardless of the scenario, it is one of the most convenient ways to apply for an extension if you can’t make it within the deadline. It can give you more time to figure out things and do the needful within an extended timeframe. You can apply for a business tax extension by submitting the IRS extension form. Be sure to submit this form before the due date.
Every successful business owner estimates the tax liability and spends money on investments accordingly. But if you fail to pay your tax in a lump sum by miscalculating the due tax amount, knowing your options would be helpful. Go for the option that can meet the needs of your business. The IRS offers a monthly installment plan for tax returns and debt settlement. You can fix some amount monthly for tax and consider it a monthly expense. It can save your business from extracting a huge amount in a lump sum in one go. However, you still need to file a tax return within the due date if you go for these options.
Whether you file your business tax through e-File or paper, you must first understand the policies, rules, and proper route. This way, you can accelerate the expansion of your business within the legal framework and reap the rewards. Having sound financial knowledge and accounting skills will help, but you can always consult a professional if you lack these two. The better prepared you are for tax season, the less likely are you to land in legal trouble.