Steering through tax season may feel like sneaking across a financial minefield. Whether you are a seasoned veteran in the filing of taxes or are doing it for the first time, tax season could be especially complicated and you will need to hold some practical tips in mind.
Organizing and examining your accounting monthly is a great way to guarantee that tax season does not have to be a stressful time. If not, here are some advice to get you started!
Give Yourself Time and Start planning Early
No one likes to spend time filling out their business tax returns but doesn’t give in to the temptation to put it off. It’s in your best interest not to begin these tax preparations prematurely. Procrastination means you might omit some accounting for a crucial financial document or skip out on recovering money because you did not claim a particular deduction.
Start now, so you are not pressured into rushing the process as the filing deadline hovers. You don’t want to put yourself in a position of filing your tax return in haste because you chose to wait until the last possible minute.
Whether you use an accountant or do it yourself, the best advice is never to wait for the start date to get started. Remember that you will also require to spend time gathering together your backup documentation in addition to the time it takes to make calculations and fill out the forms.
Provide for yourself as much time as possible for situations where last-minute problems surface. This will grant you time to rectify any missteps, as well as peace of mind knowing your taxes are all done!
Organize Your Tax Documents and Financial Records
Don’t show up in tax season with a shoebox full of receipts. Taking the time to gather the necessary tax documents and financial records (receipts and all-important documentation accumulated throughout the year, backup for earnings and expenses) and organizing it ahead of time will help lessen the anxiety of preparing your annual taxes. It makes everyone’s job and the actual filing process quicker and easier, saving time and money also. More importantly, it will help you assure your return is accurate and that you are not omitting any deductions on the table.
Use your previous year’s tax return to serve as a starting point in determining your previous income, deductions and credits declared. Retrieving a copy of your prior-year tax return can be done by requesting a copy through the IRS online portal or logging into the tax software provider you used last year. Scooping out last year’s tax return avails you with the required documentation to prepare your tax return this year.
Alternatively, you can go to the source. Visit the IRS Tax Season 2010 portal for tips and information on maximizing your tax credits. The IRS offers guidance on the types of supporting business documents you should keep if you’re self-employed.
File Your Taxes Electronically and Digitize Your Documents
You presumably know how beneficial compiling your documents is, but creating them into an e-file will be a real game-changer. You can do this using a scanner or a mobile app and upload them to your computer. This will shrink the time it would take for the government to process your return. Plus, you can have the IRS directly deposit the refund into your bank account to trim even more time!
The IRS even urges small businesses to e-file. And with e-filing, the IRS reviews your return for completeness, minimizing your likelihood of errors. Electronic filing works best if you anticipate a tax refund. Because processing electronic returns are faster than paper ones by the IRS, you can anticipate receiving your refund three to six weeks earlier. If you have your refund deposited directly into your bank account or IRA, the waiting time is even less.
Find the Right Tax Form
The way you manage your business will decide the right income tax form to use. You won’t locate all of them at the post office and library. Instead, you can head right to the source online. View and download catalogs of forms at the Internal Revenue Service website or have them mailed to you. The IRS also will lead you to sites where you can pick up state forms and publications.
It’s really important to have your business properly classified because non-adherence could result in overpaying taxes. For example, if your business is a sole proprietorship, you should register your business income and expenses on a Schedule C attachment to your income tax.
Don’t Forget About State and Local Filing Requirements
Ensure to file your annual report with the Secretary of State – your status here is one of the first items any investor will ask for, so don’t skip this step. Be sure of timely payments of any annual state and local taxes to avoid penalties, interest, and or dissolution of your business entity. You should have all tax deadlines input on your calendar, and schedule out any key steps throughout the year to help you stay on track.
Be Ethical and Account for All Necessary Income
While reporting all income, do not mix personal expenses with business expenses for obvious reasons. If you are a business owner, you should treat your business account as though you are an employee working for a company. An employee in a conventional work environment would not pay for non-business-related expenses (family vacations, personal bills, etc.) from the company’s bank account. Be fair to yourself and respect the integrity of your business funds!