5 Timesaving Tips for a Smooth Tax Season
Tax time can be stressful, no matter what type of financial situation a business might find themselves in. Usually, stress is met with frustration and scrambling to get everything together. Many companies wait until the last minute to schedule an appointment with their tax accountant, gather all necessary documents, and file their returns. With frustration comes procrastination and the temptation to take a shortcut.
Tax season should not be dreaded but dealt with accordingly. Working with your tax accountant early can help kill any frustration you may feel regarding tax season.
We but together a few other tax preparation tips to help ensure tax season runs smoothly for you and your tax professional.
Start Early
Like most, you probably have things that you put off, but procrastination is never a good thing, and it can be detrimental when it comes to filing your taxes. It's estimated that around 20% of taxpayers fail to file their taxes on time and face fines enforced by the IRS. Don't wait until a week before the deadline to start gathering the required documents needed for tax filing. Inaccuracies and mistakes happen under tight deadlines and can cause further problems with the government. When preparing your taxes, you may need to provide information and documents you usually wouldn't have on hand. It may take some time to gather them, so the best advice is to start early and don't procrastinate. Things will run smoother is all tax records are ready, and you can focus more on 2022 growth.
Get Organized
Staying organized throughout the year will make tax season easier. Keep your documents and tax records together, so when your tax preparer asks for something, you know exactly where to look. And if you ever are audited, you won't need to question whether or not an item was submitted. Below is the list of necessary forms to file.
To be filed annually:
Form 940: Employer’s Annual Federal Unemployment Tax Return
Form 944: Employer’s Annual Federal Tax Return (file this form annually if you didn’t file the Form 941 quarterly)
Form W-2: Federal Wage and Tax Statements
Federal 1096: Annual Summary and Transmittal of U.S. Information Returns
Form W-3: Transmittal of Income and Tax Statements
Form 1095-C for large employers, Form 1095-B to be given to your employees if you are self-insured, and to report health care coverage – one form for each employee.
Federal 1099-MISC form
Form 943: for those in the agriculture sector
To be filed quarterly:
Most local income tax returns
Form 941: Employer’s Quarterly Federal Tax Return
Some states need unemployment tax returns
Some states require income tax returns
Understand Important Deadlines
Your deadline depends on your business structure. For a sole proprietorship, the deadline to file a Form 1040 with a Schedule C is April 15. For an S corporation, the deadline is a little earlier. You have to complete the Form 1120S for income taxes and pay by March 15. You must provide shareholders with a Schedule K-1 (Form 1120S) so they can calculate shares, deductions, and credits.
If you miss a deadline, the IRS will impose a penalty fee of 5% monthly for filing late, up to the maximum 25%. The total penalty is devised from your deadline to the date the tax return is filed, so its best to file early. Your tax accountant can file for an extension if you are unable to gather all the required documents. An extension gives you another six months to file. Remember, there is no shame in extending, but this extension doesn’t mean you don’t need to pay for another six months. The government wants it’s money now, so you will still have to pay something. The extension gives you a little more time to dig into the numbers if you’re not ready by you CPA’s internal deadline.
If you plan on requesting an extension, talk with your tax professional early, if you wait too long, they may be in the middle of tax time and unable to request the extension.
Separate Your Deductions
Separating personal and business expenses are extremely important for small business owners. As you follow the Section 179 guidelines and divide up costs, make sure to check your personal bank accounts for any business expenses, including employee reimbursements.
Make sure to review any changes in rule deductions. For example, if your business claims the mileage deduction - check to see if the deduction changed for the current tax year. For 2022, the standard deduction is 58.5 cents per mile. If you understand the limits of deductions, you will know how they can be applied to your business.
Understand Your Needs
Filing a tax return might seem complicated, and if you begin to feel overwhelmed, it may be best to outsource your tax return to a professional, like a CPA. A tax professional can help you deal with the tax challenges as they understand the tax industry inside and out. Basis 365 works with your CPA by providing access to your year-end financials and updated data.
Remember, there is no uniform tax return, and the longer you wait, you may find yourself lower on your tax professional's list. So start early and understand your needs. A knowledgeable professional can make the filing process seamless and accurate.
Our Final Thoughts
Tax season is a stressful time for many small business owners, but companies can avoid stress by managing their tasks efficiently. Start early and work with your tax professional in November or December to create a timeline of events. By the end of January, your books should be closed; in February, make an appointment and visit your CPA or tax professional so you both can get on the “same page.” This will allow to see where they stand on your tax return. Try to do this early in the month as most tax professionals go “heads down” by mid February. If you need an extension, submit the paperwork - if you're ready to file, do it and prepare for the outcome. It's not the end of the world, just the cost of doing business. And, remember work to implement the tips above to help ensure a smooth filing experience.
