It’s April already, can you believe it? That means tax season is here. For small business owners like us, tax time can be particularly challenging. There are so many forms, documents, deductions, and things to track!
But having an organized system and understanding a few key tax tips can make the process feel much more manageable. In this month’s blog, I’ll be sharing some of my best tips for getting your small business taxes filed accurately and on time. Check out this simple and easy business expense tracker template that comes with a free e-Book to help solopreneurs manage their finances: https://mujissheaessentials.com/products/small-business-expense-manager.
Gather Your Paperwork
First things first: gather ALL your business paperwork from the past year.
This includes:
Income statements
Invoices
Receipts for purchases and expenses
Mileage logs
Credit card and bank statements
1099 forms
Payroll records
Records of healthcare, retirement plans, insurance costs
List of assets purchased or sold
Basically, anything related to the daily operations and finances of your biz. Organize everything neatly so it’s easy to access later.
Choose Your Business Structure
When you registered your business, you had to choose an entity structure. Common options include sole proprietorship, partnership, S corporation, LLC, or C corporation. You’ll file taxes based on which entity you selected.
Sole proprietors report business income and expenses on Schedule C of their personal 1040 tax return. Partnerships and multi-member LLCs file Form 1065 then individual owners receive K-1 forms. S Corps are similar but file Form 1120S before issuing K-1s. C Corps are taxed separately from owners and file Form 1120.
Know Your Tax Calendar
Stay on top of deadlines to avoid penalties. For sole proprietors, partnerships, and S Corps, taxes are due by April 15. C Corporations file by the 15th day of the 4th month after their fiscal year ends. Make estimated quarterly payments during the year to stay on track.
Track Your Income
Report all income received through your business - services sold, products sold, interest earned, credit card payments and cash payments. Review invoices, bank statements and financial reports to calculate total income. Form 1099-MISC shows non-employee compensation.
Maximize Deductions
Deductions reduce your taxable income, so take advantage of every deduction you qualify for. Common write-offs include:
Ordinary business expenses: Inventory, supplies, utilities, equipment, mileage, maintenance, advertising, insurance, legal fees, commissions, etc.
Home office deduction: Part of your home exclusively used for business may be deductible.
Health insurance premiums: If you’re self-employed, health insurance costs can be deducted.
Retirement plan contributions: You can deduct contributions made to SEP IRAs, SIMPLE IRAs or solo 401(k) plans.
Business meals: 50% of meals with a clear business purpose can be deducted.
Startup costs: Up to $5,000 in startup costs in the first year of business may be deducted.
Consult a tax preparer if you have questions on which deductions apply to your unique business model. Every situation is different, so maximize write-offs based on your individual circumstances.
Claim Tax Credits
Tax credits directly reduce your tax bill, so look into which credits you’re eligible for. Examples include the Earned Income Tax Credit, Child Tax Credit, R&D Credit, Work Opportunity Credit, etc.
Grow Your Retirement Savings
Open a SEP-IRA, SIMPLE IRA or Individual 401(k) to shelter a portion of business earnings from taxes while saving for the future. You have until the filing deadline to potentially lower taxable income with contributions.
Get Help from the Pros
Don’t DIY unless you’re positive you know what you’re doing. With all the moving pieces of small business taxes, working with a CPA or enrolled agent can save you time, stress and money in the long run. Find a tax preparer experienced with small biz accounting.
Stay Organized All Year
Set up a system to keep receipts and records organized so you don’t scramble to find everything in April. Cloud accounting software helps immensely with this. Dedicate time each week to bookkeeping tasks.
Take a Breath
Tax time is stressful for every small business owner. Remember to be kind to yourself throughout the process. Stay focused, be diligent, and consult experts to support you.
I hope these tips help make your tax filing process a bit smoother this year! Let me know if you have any other tax questions. Wishing you major refunds!
Don't forget to check out the easy expense tracker and finance e-Book for solopreneurs! https://mujissheaessentials.com/products/small-business-expense-manager
Disclaimer: This article provides general guidance on small business taxes but is not professional legal or tax advice. Always consult a certified tax preparation expert regarding your unique tax situation. I am not liable for any errors, omissions or outdated information.
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