The business tax season often falls in the first quarter of the year, usually involving the collection of taxes by the federal and state governments. During this time, businesses must pay the government any outstanding taxes they owe. This includes income, payroll, and other taxes that may apply to their business. Whether you want to file returns for the previous year or want to start preparing for the upcoming year, these initiates will be essential to your success in paying your taxes.
1. Organize Your Tax Paperwork
As a business owner, you’ll receive a large quantity of paperwork you’ll need to organize. This paperwork should include invoices, receipts, and other documents applicable to your business. You must keep your paperwork organized and up to date so you can easily file your taxes when the time comes.
It can be daunting to sort through all the documents, so it’s important to set aside time for this task. Start by creating a filing system for all your paperwork and documents, and keep track of all deductions and expenses.
2. Understand Qualified Deductions and Credits
It’s important to understand qualified deductions and credits that can help you lower the taxes you need to pay. For example, companies can take advantage of deductions for business-related expenses such as office supplies, travel expenses, and employee benefits.
Additionally, businesses can take advantage of tax credits for energy-efficient equipment or research and development costs. Understanding what deductions and credits you’re eligible for can help you significantly reduce your tax liability.
3. Itemize Business Expenses
It’s important to itemize your business expenses to accurately calculate how much you owe in taxes. This includes recording all your expenses, such as employees’ salaries, office rent, and other operational costs.
Creating an itemized list can help you keep track of your expenses, so you don’t accidentally miss any deductions or credits. Additionally, having this list can help you prepare for an audit if the IRS decides to investigate your business’s financial records. You can easily do this by working with the bookkeeping and accounting teams or getting help from tax experts.
4. Calculate the Projected Payroll Taxes
Another important step in preparing for business tax season is calculating estimated payroll taxes. You’re required to pay these taxes depending on the size of your business, and they are based on the total employee wages and any other applicable benefits.
Payroll taxes are contributions you must make to the government for each employee you hire. This includes federal and state taxes, as well as other employer-provided benefits. Calculating estimated payroll taxes will help you ensure that you have the funds available to pay your employees’ wages and the taxes the government requires.
5. Stay Up to Date with Your State’s Tax Laws
Since different states have different laws and tax regulations, it’s important to ensure you stay updated with any changes or updates. This will help ensure you’re filing your taxes correctly and taking advantage of any available tax credits or deductions.
Additionally, you must keep track of any changes in the tax code throughout the year, as this can impact your business’s tax liability.
6. When Can You File Your Taxes?
Once you’ve organized your documents and understood the taxes you owe, it’s time to start filing your taxes. Depending on the size of your business and the type of taxes you owe, you may be able to file them yourself or hire a professional to help. The filing period typically begins in January and ends sometime in April.
If you need more time to file, you can request an extension from the IRS or your state government. If you work with a tax preparer, they’ll require proof of identity and your tax ID, also known as the EIN number.
7. Consider a Tax Extension
While it’s important to prepare and file your taxes as soon as possible, there may be times when you may not be able to meet the deadline. In these cases, you may consider requesting an extension from the IRS or your state government.
Doing so can give you more time to get your documents in order and calculate the necessary taxes. It’s important to note that although an extension will give you more time to file your taxes, it won’t allow you to delay paying them.
Business tax season can be a stressful time for business owners. It’s important to be prepared and organized to comply with the law. By taking the necessary steps to prepare for business tax season, you’ll better understand how much you owe and ensure you’re able to pay your taxes without any issues.