The new year marks the upcoming tax season. This means that businesses must gather their documents and start preparing to file their income taxes. For most entrepreneurs, this is a tiresome task and one they would most probably leave on the capable hands of their accountants. But as a businessman, you must know what kind of taxes you are paying. You must be aware of the importance of keeping receipts and tax documents. You never know when you’ll be facing an inquiry from the IRS!
If you are from Denver or other states, hire a business lawyer who can work out the nitty-gritty of the tax documents with you. Ask questions. Clarify things. Make sure that you know the ins and outs of your tax documents. It’s one thing not to bother yourself with the filing of taxes. It’s another thing not to have any idea how much you’re paying the government.
Use Accounting Software
Invest in quality accounting software that will keep track of your income and expenses. These programs will help you manage your business’ expenses, income, payroll, payments, and many other things. Even accountants use accounting software to make it easier for them to prepare for the tax season. It ensures that there’s an accurate record of your business transactions so that you don’t play catch up when it’s time to file your taxes.
Collect Financial Data
If an accounting firm is keeping your financial records, call ahead and have them prepare your financial data. If you keep your own books, get a copy of your annual profit and loss statement. This will show you how much your business earned and what expenses were incurred throughout the year. This is critical information for the IRS, so make sure that you have these with you.
Sign up for a Business Bank or Credit Card Account
The first thing that you should have done when you started your business is to sign up for a business bank account. You should have a separate credit card account for your business, too. Mixing your personal and business accounts is a no-no. By the end of the fiscal year, you will need to separate your personal and business transactions manually. That’s so tedious and time-consuming.
Know Your Deadlines
Businesses have until April 15 to file their taxes. You can do it way before that date. There’s nothing wrong with filing taxes earlier than the deadline. Filing early gives you time to make appropriate changes when the IRS asks you to. Also, there are other deadlines to take note of. If you have employees, the deadline for W-2s is on January 31. If you are filling out Form 1065 or Form 1120S, you have until March 15.
Do Not Go Paperless Completely
Of course, people are going to tell you to go paperless. You need to save the environment. You need to keep your office space clean of clutter. Those are all good reasons. But technology can fail you. Cloud storage can get hacked. You may lose access to important documents because of a hard drive failure.
Keep files of important documents such as your past income tax returns. You can throw away receipts and bank statements (those are retrievable), but make sure that you have your IRS papers on hand. These won’t take too much space so that you can keep them in your office.
You can avoid panicking during the tax season by being prepared. Put a system in place. Everyone should buy in this system. If you can follow this system, you won’t have to worry about the April 15 deadline.