7 Tips to Start Preparing Your Small Business for Tax Season
Tax season will be here before we know it, but don’t wait until then to start preparing. If you wait until tax season to prepare, you’ll be scrambling and hoping you have everything you need. If you start preparing at the end of the calendar year, however, you’ll be more prepared and can rest easy during tax season.
When you get a new bank statement, don’t just throw it in a pile to look at eventually. Review the statement to make sure you can account for every transaction. If you don’t know what a transaction is, it’s easier to figure it out when it hits your bank, instead of three months from now.
Update Your Employees’ and Contractors’ Information
Before the end of the year, check with your employees and contractors to make sure you have everything you need to file forms W-2 and 1099. You’ll need things like their address and their social security number (SSN) or taxpayer identification number (TIN).
Know What You Have to File
Before the end of the year, make sure you know what forms you have to file.
If you paid employees during the year, you’ll have to file W-2s. If you paid any contractors, you might have to file forms 1099-MISC.
Your business entity will dictate what income tax forms you have to file, like a 1040 or a 1065. Just make sure you know what you have to file before you have to file.
Know Your Filing Deadline
April 15 is probably permanently stuck in your head, but not every form is due on April 15. Before tax season starts, make sure you know when you have to file each form, so you don’t get caught off guard.
If You Think You’re Going to Be Late, File an Extension
As it gets closer to tax deadlines, if you think you’re not going to be able to file in time, file an extension. Sure, sometimes it’s better to ask for forgiveness than permission, but when the IRS is involved, that’s not a good idea. But, you can file for a six-month extensionto give yourself some more time to get everything done.