Small Business Spotlight: Tips For Filing Your Taxes
For small businesses, the beginning of a new year can be a stressful time. Whether you’ve been in business for 20 years or just one, filing your business taxes is something hardly any business owner wants to do. Even though small businesses are subject to little or no capital taxes, their “pass through” status makes filing taxes tricky. Small business shareholders must “pass through” all profits, losses, investments, and earnings to their own tax returns.
So, when you’re responsible for filing your own taxes on top of your share of your business, the waters can become murky. The last thing you want to do it make a major mistake, being penalized or audited by the IRS later in the year. Every small business owner could use a few, simple small business tax filing tips. Keep reading to learn more:
1. Keep Hyper-Detailed Records
When tax time rolls around, there’s nothing more valuable than crystal-clear records. As a small business owner you should log every bill, investment, profit, loss, expense, etc. Keeping every receipt, invoice, and bill may seem like overkill, but it’s really not. To file your taxes the right way, you need to know your numbers. If you have any questions about where your money came from or where it went, you risk filing incorrectly.
2. Get The Right Forms
Nothing puts a kink in your tax preparation more than pouring your time into the wrong forms. This is a mistake so many new business owners make. Do your research well before tax time to make sure you’re printing off the right forms – if you have questions, don’t hesitate to ask someone with more experience. Even the smallest oversight, like filling out an 1120 instead of an 1120S can leave you scrambling for time when you realize your mistake. Even more, sending the IRS the wrong forms can affect your status and return.
3. Don’t Over-Do It With Deductions
Everyone loves a tax break, especially small business owners. A “pass-through” status means every dollar and cent comes right out of your own return – even affecting your tax standing. So when costs are high, it makes sense to want to take every break you possible can. But, it’s important to keep deductions in check. This isn’t to say you shouldn’t claim them if they’re legitimate – just don’t over-do it. If you really do run your business from home, claim the home office deduction. But, if you only work afterhours at home sometimes, don’t abuse the cut.
4. Spend The Money On Help
One expense you should never spare during tax time is hiring a professional to help. Even just using a good online tax preparation service can help you avoid making serious mistakes. Few small business owners are also tax specialists. This is why seeking help is never a bad idea. There could be quite a few expenses, claims, cuts, and mistakes you’re overlooking. An expert can help you file the best possible return when April 15th rolls around.
Preparing for tax time isn’t a task that small business owners look forward to. But, it’s a necessary part of being your own boss. Preparing all year, using the right paperwork, claiming only what’s right, and consulting a professional are just a few things you can do to be ready when Uncle Sam comes knocking. Don’t risk your entire business by failing to prepare for tax time.