TAXES & ACCOUNTING • February 18, 2016
2 minutes Read
Filing business taxes is rarely simple and uncomplicated. It’s crucial to make sure that you’re not overlooking anything — mistakes in even the smallest details can cost you time and money. Use this checklist to make sure your business is tax-ready and you’re not forgetting anything important.
1. File payroll forms. If you have employees—or if you operate as an S-corporation and pay yourself a salary—you’re used to filing quarterly payroll tax returns. But when a new year begins, additional forms are needed. For instance, you must file W-2 forms for each employee. For a list of all the payroll forms you may need to file, visit the IRS website.
2. Send 1099 forms to contract workers. If you hired a freelance or contract worker in the past year and paid him or her more than $600 during the year, you must file a 1099 form for each individual. Keep in mind, if you are paying someone as if he is an independent contractor, but his work schedule and circumstance meets the IRS’ criteria for being an employee instead, you can be penalized. If you’re not sure whether your workers are technically contractors or employees, read up on the IRS rules here.
3. Assemble income records. To file your tax return properly, you’ll need records of all your business income for the past year. That includes gross receipts from sales, inventory if applicable and any interest earned from checking or savings accounts.
4. Assemble expense records. So that you can deduct allowable business expenses, you’ll also need to gather records of all business expenses from the past year. That includes travel receipts, marketing and advertising expenses and office purchases. If you work in an in-home office and want to take the home office deduction, you’ll need to determine the square footage of your home and determine the percentage of your home represented by your office. You can then deduct that percentage from home utility payments (which means you’ll need receipts from utility bills from the past year).
5. Seek help. While you could technically file your business taxes on your own, most business owners seek help from a tax professional to ensure that they’re getting it all done correctly. If you don’t have a CPA already, seek recommendations from other owners who operate similar businesses. If a CPA already has experience in your industry, that can be helpful. Once you’ve selected a tax preparer, provide him or her with your tax records and information as soon as possible. Remember, he or she likely has many tax returns to prepare and if you don’t want to file at the last minute, allow your preparer plenty of time to go through your material and ask questions.
6. Store and organize files properly. After you’ve filed your return, you’ll probably hope never to see last year’s receipts again. But if the IRS decides to audit you or your business, or has questions about your return, you may need all that documentation again. Consider scanning all receipts and maintaining them in an electronic file; that way, you won’t have to keep up with so much paper or worry about the print fading on old papers. And throughout the year, you can make next year’s filing easier by maintaining your records in an organized, easily accessible system. Take a look at this filing cheat sheet from The Small Business Kit for Dummies for organization ideas.
Tax readiness doesn’t have to be daunting. With a little preparation throughout the year—and a set of steps to check off—you can be ready for tax season and maintain your sanity.
Photo credit: Biro Emoke/shutterstock.com
IMPORTANT INFORMATION: This is not investment, tax, or legal advice. Should you have questions, please consult your own attorney, tax accountant, or other appropriate expert having expertise in the area of your question or before making important decisions in these areas.