Now that the holidays are well behind us and the new year-hype has finally dulled, tax season is here to remind us that life can’t be a ball all of the time—unless you’re expecting a large tax return, I suppose. But for most of us, tax season is a chore, and for small business owners, the best way to cope is to remain organized throughout the year. Here are some additional tips to help small business owners get through this season peacefully.
- Make sure you appropriately structured your business. This should have been done at the inception of your company and will affect the way you are required to pay taxes. It is a good idea to consult a tax advisor early to determine whether a sole proprietorship, C Corp, S Corp or LLC is the best choice for your small business.
- Keep detailed track of expenses throughout the year, vehicle usage, monetary donations, equipment and property loans, training seminars and other potential tax deductibles. Most of these deductions will depend on your small business’s structure, so take that into account, and be cautious to avoid an audit. Large sum deductions, home office deductions, and classifying too many employees as independent contractors are often flagged by the IRS, according to the SBA.
- Be aware of laws that exist to give small business owners tax breaks like the Small Business Jobs Act of 2010. Also, don’t forget about your obligation to state taxes and industry-specific taxes in addition to federal.
- Know your return deadline and request an extension if necessary (hopefully you’ve already met your January 31 self-assessment deadline). Final returns are due by March 17 for corporations, and returns for individuals, partnerships and LLC’s are due April 15. An extension may be requested using an IRS Form 4868 or Form 7004, again depending on your structure, according to an article by the St. Louis Post-Dispatch.
Photo Credit: Tax Season