Prep Your Small Business For Tax Day With These 14 Smart Steps

Consider tracking your income and expenses on your own so you can simply call them up when you need to file your taxes. Most business payments between S-corps and their owner have no income tax effect. The S-corp deducts the payment as an expense, which reduces the net income flowing to the shareholder. The payment is taxable to the shareholder, which offsets the reduction in net income. A good rule of thumb is to make the conversion when you hire employees.

Turn your receipts into data and deductibles with our expense reports that include IRS-accepted receipt images. Review your current expenses before the end of each year and prepay some of those amounts if you want to reduce your income for the current year. You can also increase your expenses and decrease income by making expenditures, such as stocking up on supplies at the end of the year so that you’re covered for the first quarter of the next. Tax credits are the federal government’s way of encouraging businesses and individuals to do things—or not do things—that affect the greater good.

Donate old business equipment

As a small business owner who employs staff, you have a legal obligation to report, withhold, and pay employment taxes. Speaking of clean data, tax season will be much easier to navigate if you have accurate reports. Pull bank statements to reconcile income and outgoings with receipts or 9 Tips For Small Business Taxes invoices. You can use an accounting software that does it for you (more on this later), or a free tool like Shopify’s invoice generator. Many taxpayers think they need a new dictionary to understand their tax return. The world of accounting comes with its own specialized terminology.

However, Tax Day isn’t the only date to be aware of, especially as a business owner. To calculate small business taxes, you’ll need to know your business structure and which taxes your business is liable to pay. Even if you plan to hire an accountant, it’s never a bad idea to have an understanding of what you owe and what factors contributed to your tax debt. Let’s take a look at how to calculate taxes as a C-corporation or a pass-through business. If your business has employees, add employment taxes to your list of business taxes. Once you’re organized, hire a tax pro to help you sort through the myriad of tax deductions that might be available to your business.

Estimated Taxes

The Internal Revenue Code is set up to provide numerous tax breaks to individuals and businesses alike. Even the IRS acknowledges that you must keep some money to live on and with which to run your small business. Even though you might be rolling https://kelleysbookkeeping.com/what-is-a-general-ledger-account/ in the big bucks and made a profit, not all of the money is yours as you’ll need to hand some over to the taxman. A good rule to follow is that you budget for this as you go along so that you’re not massively shocked at the end of the year.

• Below, a panel of Forbes Finance Council experts shares some essential steps small-business owners should take well before tax day.
• Payroll apps like Gusto, ClockedIn, and Homebase can assist you when managing payroll and paying employment tax.
• Rather than your income and other funds being thrown into a personal account, being a business owner means some business-based finances will combine with your personal funds.
• Without planning, you or your tax professional can only do so much to improve your tax situation.
• Your best course of action is to file on time, pay your tax debt as soon as possible, and keep communication open with the IRS.

Speaking of those sneaky tax deadlines, whatever will help you remember that the tax deadline is approaching, do it. A looming tax deadline can be quite stressful, especially if you’re rushing because you forgot and any mistakes made can take longer to process. All features, services, support, prices, offers, terms and conditions are subject to change without notice. Especially as your business grows, you should make sure you still have the business organization type that works best for you.

Invest in a Business Building

This easy-to-follow small business tax guide will answer all of your tax questions. For small businesses, tracking business expenses with a paper journal is tedious, time-consuming, and can lead to errors. Expense-tracking apps have improved over the years by offering robust capabilities that allow businesses to keep tabs on how much they’re spending and where their money goes. If you’re the only member of your LLC, you can file your taxes using Form 1040, and Schedule C, E, and/or F. If the LLC is an S corporation, you’ll have to file Form 1120 or 1120S.