It's tedious and time-consuming, but proper business tax preparation is necessary. Planning, record keeping, and money handling are just the operational stuff. You also have to consider the entity structure, risk, exit strategies, and more. Tax season is undoubtedly one of the most stressful times of the year for small businesses. There is a solution that can help with the stress: creating a plan.
Gather Necessary Information
Assembling certain documents for your business tax preparation will help fend off frustration. There are numerous items and that businesses need in order to even begin preparation. Here’s a list of items to have at your fingertips:
· Last year’s business tax return
· Accounting records
· Bank statements
· Credit card statements
· Payroll reports
· Asset purchases
· Depreciation schedules
· Vehicle information
· Articles of incorporation (for new businesses or without a prior tax return)
· Partnership agreement (for new businesses or without a prior tax return)
Know Your Forms
You simply cannot file taxes correctly without the right forms for your business type. There are four tax forms based on the enterprise type: sole proprietors, corporations, S corporations, and partnerships. Sole proprietors much submit a 1040 form along with a Schedule C form. Corporations are taxed differently and must file an 1120 form. S Corporations are also taxed differently. What makes an S Corporation unique is that shareholders are only taxed based on the portion of the business they own. Anyone filing taxes as an S corporation must use an 1120S. Although a partnership will not pay taxes directly through the entity, it must still file a Form 1065 along with a Schedule K-1 to the IRS for each partner.
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Understand Deductions
There are several tax deductions available to small business owners regardless if you are an LLC, partnership, or an entity taxed as an S Corp. There are obvious deductions such as printer paper and business cards. However, cell phones, home offices, meals, and entertainment may also be part of your deductions!
When it comes to self-employed health insurance and saving accounts (HSAs), it can be tricky. These expenses need to be deducted on a Form 1040 rather than a Schedule A. Also consider a Health Reimbursement Arrangement (HRA) or a Flexible Spending Account (FSA) for deducting dependent care benefits.
These are the type of things that Halon will help you with. Often the small business owner gets in trouble because he or she did not understand the rules. Once you know the rules and know how to apply the rules, owners can take advantage of small business tax deductions without concern.
Next Steps
There are many other things to consider when prepping for tax season. Expense reimbursements, liability issues, retirement plans including annuities, life insurance, key person insurance, defined benefits plans, long-term care, and more are all issues our CPA’s can help with.
We understand that taxes can be confusing; that's why we have a state-of-the-art program. Halon specializes in small business tax preparation for businesses. Outsourcing these essential tasks will allow you to focus on growing your business while we take care of the complicated tax forms and reporting.
Our team is here to help you determine the right forms, deductions and tax credits for your business. Contact us today to see how we can ensure your business is tax compliant year-round and remove the stress of tax season for good.
