How to Prepare for Tax Day as a Small Business Owner
No matter what type of business you own, filing taxes for your company can be one of the more daunting tasks. However, some careful planning and preparation can help make this uphill battle more manageable. Here are some ways to prepare for Tax Day as a small business owner.
Know Your Tax Obligations
As a small business owner, it’s important to understand what taxes you will need to pay. This usually includes:
- Income Tax
- Self-Employment Tax (for sole proprietors and partners)
- Payroll Taxes (if you have employees)
- Sales Tax (if your business sells physical products)
Keep Detailed and Organized Records
It’s important to keep a detailed log of the money coming in and out of your business to help verify your tax filings. Some specific kinds of documents to keep a record of include:
- Income Statements: Keeping a record of your income statements (profit and loss reports) as well as any balance sheets is crucial when preparing for tax season.
- Expenses: These costs may range from office supplies and rent/utilities to costs for advertising and business travel. Whatever the business expenses are, it’s crucial to have supporting documents, such as checks, receipts, credit card statements, and invoices to back up the amount you are spending to operate your business. If you are taking any tax deductions, you will need a paper trail to substantiate your business-related purchases.
- Purchases: Keep records of any items you buy for your business. Ensure that the records show the amount you paid, the person or company you paid, and a description of what you purchased.
- Assets: Keeping detailed records of any assets related to your business is important. This can include receipts for furniture and machinery purchased that are used to run your business. Showing proof of payment will help calculate annual depreciation and gains or losses if you sell these assets.
- Payroll Tax Documents: If you have employees, you must keep payroll records, including documents showing wages and benefits.
Consult With a Tax Professional
Navigating tax season as a small business owner involves many moving parts. Furthermore, each small business has its own unique tax situation, so it’s always wise to work with a Certified Public Accountant (CPA) to help you determine the best tax strategy for your business. A CPA can help tailor your taxes to your business structure, guide you through the specific requirements for your business, and help you respond to any changes in tax regulations so that you remain compliant.
JTS Associates CPAs is always here to help small business owners when it comes to preparing and filing their taxes. Contact us today at 516-877-5900 to schedule an appointment.
