With the new year quickly approaching, it means it’s even closer to tax season. If you are a business owner, you should already be preparing for this essential time. It is wise to prepare your business taxes ahead of time as the deadline to file will come faster than you think. There are five great tips to help you prepare your business taxes of which you should take advantage.
Organize Ahead of Time
Preparing your business taxes should be done all year long. If you organize all of your financial records, including expenses and deductions, you can save precious time before tax season even begins. Your finances should be easily verified through a good record-keeping process. This can also help you to maximize your business’ deductions. Store all pertinent documentation either digitally or in a physical file where it’s easily accessible.
Use Accounting Software
Using accounting software can help you to take advantage of getting your taxes done. It can lighten the load and save you money that you would otherwise spend if you hire an accountant or bookkeeper to prepare your taxes. Many of the options available include an array of features that can ensure that your taxes are properly prepared and many include plenty of options for businesses. You can also make use of accounting software to keep all your important documentation handy.
Apply for an EIN
If your business is still new and it’s your first tax season, or if you have restructured, you will need a new employer identification number (EIN). This number is issued by the Internal Revenue Service (IRS) and makes your business unique so that it is easily identifiable. You can apply online and quickly get an EIN.
Distinguish Taxes for Employees and Contractors
It’s important to keep the taxes for your employees and independent contractors distinguished. This is largely due to an employee’s work being monitored regularly while an independent contractor’s work can only be assessed once they have completed the job. A regular employee receives a W2 form, which is different than that of a contractor, who is subject to self-employment tax and requires Form 1090 or Schedule SE. Regular employees have taxes deducted from their pay, whereas independent contractors are required to pay their own taxes as they don’t have this amount deducted from their pay.
As a business owner, you know there are certain things you can take off on your taxes to maximize your deductions. For example, if you use your personal car for business purposes, you can take taxes off on it. The same can be said if your home is used to conduct business. Often, many of these deductions are overlooked, which results in businesses overpaying taxes. Make sure you know what can be deducted so that you can get save money on your taxes.
These five tips can help you to better prepare your business taxes. They can help you to save money and ensure that you will be well prepared for the next tax season as well.