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It's that time of year again. The time when business owners start to feel the crunch of tax season. If you're feeling overwhelmed, don't worry, you're not alone. Tax season can be a stressful time for any business owner, but it doesn't have to be.
Below are a few things you can do to make tax season go a little smoother and more successful.
1. Gather your general tax documents
As a business owner, it's important to stay on top of your taxes and make sure you are paying the correct amount. To do this, you will need to gather all of your business tax documents and records. This can seem like a daunting task, but we're here to help guide you through it.
Here are some of the common records you’ll need, depending on the type of business you have:
- Year-end profit & loss statement and balance sheet
- Year-end business bank account and investment account statements
- Business receipts and expense records
- Home office deductions (we expand on further in the article)
- Bank statements, and payroll records
- Tax forms - Again, this will vary depending on your business, but common business tax forms include 941, 1099, 1065, and 1120.
The more prepared you are with the gathering of your records, the smoother your tax day will go.
2. Stay current with your state’s tax laws
Staying current on your state’s tax laws and developments is important because it will help you make informed decisions about your business and ensure compliance with state tax regulations.
There are a number of ways to stay current on state tax issues. You can sign up for email alerts from your state tax agency, subscribe to industry publications, or attend seminars and conferences. You can also consult your bookkeeper and/or your accountant.
Keeping up to date on state tax issues will help you run your business more smoothly and avoid penalties for non-compliance.
3. Identify all your tax deductions
The key to reducing your tax liability is figuring out all the deductions you can take for your business. Major deductions include:
- Business travel and meals
- Business insurance
- Business interest and bank fees
- Employee salaries and benefits
- Educational expenses
- Office supplies and equipment
- Charitable contributions
- Advertising and promotion
- Startup expenses
Be sure to keep track of your tax deductions throughout the year so you can claim them on your taxes.
4. Gather your home office information
If you work from home, gather all the documentation you need pertaining to working from home. This includes:
- Square footage of your office - According to the IRS, you must “regularly use part of your home exclusively for conducting business.” In other words, you must have a space in your home that you use for business purposes, such as a home office or extra room that is used for business.
- Business supplies and office expenses – You can deduct office supplies such as printer paper, pens, calculators, computer software, a portion of utilities, mileage for business travel, retirement plans, interest on a business credit card, and cleaning services.
- Home improvements to your dedicated office space
Once you have everything in order, you can review with your bookkeeper or accountant what you can write off as a business expense.
Conclusion
There are advantages to getting organized in advance of the April 2023 deadline. One major one is reducing your stress level while saving time. Using software like QuickBooks can also make it easier and simpler to organize and track your income and expenses and maximize tax deductions. Contact us if you have any questions about preparing for tax season at (203) 641-7678.
