Just like April showers bring May flowers, April 15 brings Tax Day. Even though we know it’s coming, somehow the tax deadline tends to sneak up on us. As a small business owner, you have an incredible responsibility for filing correctly and in a timely way to save both time and money. It takes time to properly organize and file taxes, and the 2014 Small Business Taxation Survey found that 40% of small business owners spend 80 hours preparing for their income taxes. Whether you DIY or employ an accountant, we want to take the heartache out of tax preparation and save you precious hours and resources.
There are a few guiding principles that can help anyone – from an independent freelancer to a small business owner with 300 employees – turn tax season into a manageable undertaking.
Brush up on your tax vocabulary
Given that the tax codes change more than once a day every single year, a refresher on specific terms’ meanings and where they are applicable is valuable for anyone. There is a directory of phrases to be well acquainted with, and DailyWorth created a handy cheat sheet to break down their meanings into layman’s terms. Being educated and grasping how these rules apply to you and your business will make filing your taxes much easier and give you a better perspective moving forward (as in future tax seasons) regarding expenses, deductions, and other tax implications from your business.
It’s time to tackle your drawers, folders, travel bags, and boxes that are filled with various receipts and other financial documents that you’ve collected over the past year. Aside from your various business expenses, you need the following documentation before you can begin the filing process:
- Charitable donation receipts
- Significant medical bills
- W-2, or another form showing your income
- Anything related to real estate property
- Investment and IRA statements
Create an individual file, digital or physical, for each category. With everything in one place, tallying totals and itemizing your deductions will be a breeze. Small businesses are often subject to audits, so having your receipts readily available as proof of purchases will make that process easier for you and the IRS.
Classify deductible expenses
Deductions come in many forms and often are not clearly stated on government papers. However, knowing which items in your personal and professional lives are deductible can add up to a major tax savings on your end.
For a quick reference guide, eFile compiled a complete tax preparation list, inclusive of over 25 deductions available. If you have questions or believe you have deductions not listed on this sheet, speak to a professional. This is when consulting an accountant is worth their weight in fees. Their expertise means they uncover deductions you may not have been aware of or considered on your own.
Utilize your resources
As mentioned above, working with an accountant has significant advantages when you’re running a small business. If you’re hesitant to hire a professional, though, there are plenty of budget-friendly, specialized services available online. Digital products, such as TurboTax, H&R Block, and TaxACT, walk you through the filing process step-by-step. These are reasonably priced programs that take the guesswork out of filing.
Have additional concerns? Now there are tax apps to answer any questions! With 24/7 access, you can type in a question, keyword, or category and get a response immediately. AskaCPA and IRS2Go are two reputable sources for tax codes and advice. Even those who are tax savvy have questions, so we’d encourage everyone to download an app during return season.
If you’re still feeling out of your comfort zone with the whole tax return process, this list may help you pull the trigger on hiring a professional.
We hope you found these guidelines informative and helpful. Bookmark and revisit this post throughout the year to make next season a seamless experience. Have other tips? Comment below and share with the community!
About the Author: Julie Chomiak is the Content Marketing Specialist for Webs and Pagemodo. When she’s not scouring the web for small business trends, Julie loves traveling, interior design, and animals of all kinds. Get more from Julie on the Webs Blog and the Pagemodo blog.