What do you think of when you think of tax seasons? You may feel some stress or overwhelm regarding filing your taxes. Fortunately, you aren't alone because taxes can stress a lot of people out.
Still, that doesn't mean you shouldn't take tax season seriously. You need to know what you need and when everything is due to avoid problems.
Keep reading to learn more about tax season as a business owner or CFO.
Start Early
To prepare for tax season, start as early as you can. Then, you won't have to scramble to complete certain steps by the deadline, so you can take your time and get things right. As a business owner, your taxes can be complex, so filing your taxes may take longer than for someone who works for another company.
Plan out when you will go through your finances and file your taxes. Put that plan in your calendar and stick to it. While taxes can be scary, they're an important part of doing business.
Doing your taxes correctly and submitting them on time means you won't have to worry later. Of course, that doesn't protect you from an audit from the IRS. However, it can save you a lot of stress near the end of tax season.
Know What Forms You Need
As you start planning when to file your taxes, figure out what forms you will need. Most businesses will need to fill out a Form 1040 and a Schedule C. Some businesses may also need to fill other forms based on the business structure, such as a partnership.
If you have assets, you may need to complete Form 4562 to account for them. Business owners who work from home can also submit a Form 8829 to account for business expenses.
The IRS has tons of forms for businesses for different purposes. Consider what type of business you have as well as your income and expenses. Then, you can fill out all of the forms you need when you file your taxes.
Determine If You Need to Pay Self-Employment Taxes
While not all business owners need to pay self-employment taxes, many do. You will need to pay self-employment taxes if you have a sole proprietorship, a partnership, or are a member of an LLC.
S-corp and C-corp don't have the same requirements. So consider your business structure and if you did any freelance income outside of your business. Even if you have an S-corp or C-corp, you may need to pay self-employment tax on other contract work.
You can use accounting software to estimate how much you'll owe, or you can calculate it yourself. Then, you can make sure you have enough money to pay those self-employment taxes. If you don't have the money, you may be able to pay it later, but you shouldn't make that a habit.
Consider the Due Date
When planning your taxes, you should consider when taxes are due. In the US, taxes are due on April 15 or the business day after it, if it falls on a weekend. While you can file your tax returns on Tax Day, you should aim to do so earlier so that you don't miss the deadline.
If you can't file before the due date, you can apply for an extension. The IRS can extend the deadline to as late as October 15, so you can have plenty of time to organize everything and pay your taxes.
Whether you get an extension or not, know when your taxes are due. If you have a busy schedule, you can work in enough time to do your taxes, or you can determine if you need to hire an accountant so that you can save time.
Organize Your Finances
Another essential part of tax season is being able to organize your finances. If you have a business, hopefully, you have some bookkeeping system to use throughout the year. Then, you won't have to spend as much time organizing your finances.
Of course, you need to consider your business income. But if you work a part-time job or if you have a trust, you will also need to organize the tax forms and finances for those. Luckily, many employers will give you a W-2, and you can find an online trust tax return if you have a trust.
You can use a folder or put all of your tax forms in a drawer to organize them. That way, you'll know where everything is when you go to file your taxes.
Check Your Mileage Logs
If you used a vehicle at all for your business, you should review your mileage. You can deduct quite a bit of your income if you use your car to go to different client sites or for business travel.
Take a look at your mileage logs for the year and consider which trips were for business, especially if you use your personal car. Then, you can consider the mileage rate to get your deduction.
The mileage rate deduction changes year to year, so make sure you know the current rate. That way, you can maximize your tax deduction, and you can keep yourself from owing some of that money later.
Decide How to File
You should also consider how you plan to file your income tax. While business taxes are a bit complex, you have the same filing methods as people with traditional jobs. Consider how you can file your taxes.
• Online
• By mail
• Using tax software
• With an accountant
An accountant can be a great option if you don't have a lot of time or if you have a lot of things to include. But it can also be expensive, and tax software can be as useful but much cheaper.
While you can file without either option, you need to be very careful to get everything right. Then, you won't have any issues with the IRS after filing your taxes.
Understanding Tax Season
Tax season is a stressful time for many people, especially business owners. You have to organize your receipts, get the right forms, and submit everything in time.
Luckily, tax season doesn't have to be scary. As long as you know what you need, you can get everything together. Then, you can file your taxes more easily to avoid IRS issues.
Did you enjoy this article about understanding tax season as a business owner? Check out more tax, accounting, and financial planning articles in the Finance section of the Bootstrap Business Blog.
