Tax Planning & Preparation

How To Get Your SMB Ready For Tax Season

How To Get Your SMB Ready For Tax Season

As a small or medium-sized business owner, you already have a full plate. However, once a year you need to shift your focus to getting taxes done. There are things that you can do now to make the tax season much easier for your company and tax preparer. You want to pay your fair share but you also want to take advantage of all the available deductions that can help your company grow. Here are a few tips to get your SMB ready for tax season.

 

Gather and Organize Your Documents

During the year, your company probably produces and receives countless transaction receipts and documents. From receipts for business lunches to lease agreements for needed storage space, there’s a mountain of paperwork involved for even the smallest business. Your tax preparer can more quickly and easily prepare your tax filing if they have all the documentation in one place. Staying organized throughout the year will reduce the inevitable crunch at the end of the year and limit the questions that you may need to answer. Also, careful and consistent documentation is essential in the event of an audit. A few of the records and documents that you should keep throughout the year include:

  • Cash register tapes
  • All your banking records
  • Canceled checks
  • Receipts for credit card
  • Receipts for petty cash expenses
  • Copies of membership agreements
  • Subscription service agreements
  • Invoices
  • Statements from credit cards for the business
  • Lease agreements for equipment
  • Purchase agreements for equipment
  • Registration for company vehicles
  • Insurance documents

Of course, there is more documentation that your tax preparer might ask for to create your tax return. If you think that it might be important, you should send it to your tax preparer and allow them to make the final decision. As a general rule of thumb, if it looks important, it is important.

You might consider designating a location in your office for all of your documentation. If you’re able to keep everything you need to complete your taxes in one spot, it’ll make it easier to organize before tax season.

 

Update Employee and Independent Contractor Information

As a business owner, not only do you need to worry about your personal and business taxes, but you must also provide tax documents to your employees and independent contractors. Contractors include anyone who has provided work for your company, and has been paid more than $600 without taking out taxes or making them an employee. Even if your accountant is in charge of sending out tax forms to employees and contractors, you’ll need to provide them with the correct addresses. You may also need to contact former employees and contractors that you worked with during the year to verify you have up-to-date mailing addresses.

If an employee at your company has moved or passed away during the year, you’re still responsible for making a good faith effort to get their tax forms to where they need to go. If you do it ahead of tax season, you’ll reduce your stress for yourself and your employees during this already hectic time of year and it’s crucial to provide your tax preparers with the most up-to-date info that you have.

 

Maximize Your Deductions by the End of the Year

Talk to your tax preparer about deductions that you might be able to take advantage of at the end of the year. For instance, if you run a restaurant, you might be able to donate holiday meals to a local homeless shelter and write the expense off as a charitable deduction. Holiday bonuses for your employees can also work as deductions and might end up saving you money in addition to spreading goodwill amongst your workforce.

Are you planning a holiday party for your employees and customers? Check with your tax preparer to discover the conditions you need to meet to deduct the expense from your tax bill. It’s also common to make end-of-the-year purchases of equipment or a new company vehicle that you can deduct from your taxable income.

Don’t leave any potential money on the table by missing out on deductions. This is especially true if you can apply them to things you already planned to do or purchase. Talk to your tax preparer and make sure that you aren’t missing out on any possible deductions. As always, keep careful records and receipts of any deductions that you take.

 

Save the Dates

As it gets closer to tax season, you need to be aware of deadlines that you must meet, such as filing your taxes and sending out tax documents to your employees. You also need to know if your tax preparer has any cutoff dates that you need to abide by—they may require you to have all of your documents to them by a certain date so that they have time to review and complete your taxes on time.

It’s always a good idea to add these dates to your electronic calendar and any physical planners that you might use. Staying organized helps you avoid missing any essential deadlines and paying penalties, and if you’ve kept your documents in a single place, it should be a cinch to meet your deadline.

 

Determine a Method to Pay Your Tax Bill

In a perfect world, you’ve paid your taxes quarterly and you won’t owe any money. However, the world is far from perfect and you may end up owing the IRS taxes after your forms are completed. You have a few options for paying this tax bill. The best way is to make a one-time payment at the time that you file your taxes. This option helps you avoid paying interest, penalties, and late fees.

Paying all your taxes when you file isn’t always an option, unfortunately, and you may need to choose between a short-term and long-term payment plan. The short-term payment plan means that you’ll pay the full amount owed within 120 days, while the long-term plan is for business owners who owe a larger sum and need extra time to pay it down. It’s always beneficial to discuss your payment options with your tax preparer.

 

You can be ready for tax season by getting a jump on it now. At Avitus Group, we’re always ready to advise you on how to get your SMB ready for tax season. Contact us today with any questions you may have or schedule a free 1-hour business tax assessment with one of our tax experts to get answers to your most difficult tax questions.

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