EA - Last Minute Tax Tips for Small Business Owners

Last Minute Tax Tips for Small Business Owners

If you have procrastinated your tax preparation and filing this year, then these last-minute tax tips might be just what you need as you are facing the looming deadline. Business owners often agree that tax season is the most stressful time of the year. Not only do you need to worry about paperwork, number crunching, and financial reports. But there are often cash flow concerns as you are evaluating the bills that need to be paid to the IRS.

Even though it can be a stressful experience to file taxes as a business owner, there is nothing to worry about when you have a good team to help. An experienced accounting and bookkeeping team can be an invaluable resource to ensure that your taxes are filed timely and accurately.

Tax Tips for Your Small Business

At Easier Accounting, we specialize in all of the financial services needed to keep your business running. Here are some of our best tax tips when you are facing the last-minute crunch of finishing your filing for the year.

  • Deductions to Lower Taxable Income: Even though it takes a little more work to sort through receipts and categorize spending, this extra step is essential if you want to reduce the amount that will be paid. Business owners have a variety of deductions that can be used to reduce taxable income. Just make sure that you are staying within the guidelines established by the IRS to avoid raising red flags with the write-offs.
  • Contributions for the Year: As you are finalizing the numbers on your tax return, is your taxable income still higher than you were anticipating? Other strategies can be used to lower your taxable income. For example, you might decide to contribute to an IRA, helping you save for the future and reduce the amount that will be paid for taxes this year. Even though you are filing 2018 taxes and the calendar year is technically over, you can still contribute until the tax filing deadline and have it count. Talk to your accountant for personal recommendations about the type of IRA that will work best for your needs. As a self-employed individual, you might consider opening a Simplified Employee Pension Plan (often called a SEP IRA), which allows you to contribute up to 20% of your annual income.
  • Organize Paperwork: Handing your accountant a stack of messy paperwork is the wrong way to approach tax preparation. While your accounting team can help with financial strategy and tax prep, you shouldn’t be handing off all of the responsibility. As a small business owner, you need to have a general idea about what is going on with your bank statements, financial reports, costs, profitability, and more. Do your best to organize the paperwork so your accounting team can sort through the numbers and support your strategy.
  • Electronic Filing and Payments: Now that you are down to the last few days, it makes sense that you should take advantage of the digital options for tax filing. It’s been found that paper filing increases the potential errors and could result in lost paperwork, resulting in late fees and fines. We live in a digital world, which means you should take advantage of the digital tools that are available. The simplest solution is to work through your professional tax preparer to complete the digital filing. You can also submit direct deposit payments online to avoid the need to visit a post office to mail checks for payments.
  • Filing Without Payment: One reason why business owners sometimes procrastinate their tax filings is that they are worried about how they are going to come up with the cash to pay the tax bill. Even if you don’t have the money in the bank to pay your taxes, keep in mind that financing options are available through the IRS. Remember that it is more expensive to pay the fines and fees that come from not filing than it is to pay interest costs that come with a payment plan. In fact, the penalty for not filing your tax return could be as much as 10x more compared to not paying in full. The costs can add up, resulting in a higher bill in the future. Avoid late-filing penalties by filing by the deadline, then submitting for a payment plan.
  • Filing an Extension: Sometimes it comes down to the wire, and you just aren’t ready to file your taxes by the deadline. If you need more time or you don’t have complete information, then it might make sense to file an extension. This process gives you 6 more months to file your taxes for the year. Keep in mind that even though you have more time to file your taxes, it doesn’t give you an extension to pay. You still need to send the anticipated payment by April 15th to avoid late-payment penalties. That amount can be adjusted later in the year when you finalize your tax filing. If you choose to file an extension, then Form 4868 needs to be submitted. Or, an automatic extension is available when you estimate the tax liability and make an electronic payment.
  • Report All Income: Failing to report money that was received can start a domino effect of problems that you will face with your tax filing. One problem with scrambling to complete your taxes at the last minute is that you might overlook important information that should be included on the tax return. Every time you receive a 1099 form, remember the IRS receives the same information. If you fail to report income that was received, then it could result in a stressful IRS audit. Even if you don’t receive a 1099 form for contract work that was completed, you are still obligated to report the income on your taxes. It is important to track this information throughout the year so you can be thorough with reporting accurate numbers for your income and expenses.
  • Don’t Guess on Deductions: As you are wrapping up the information for your tax paperwork, it might be tempting to guess on some of the numbers for your deductions. Even though you think that you can get close with estimates, it is essential that precise figures are provided. Estimating could be a mistake that hurts you in the future, potentially resulting in fees and fines. If you are audited, all of the numbers need to be documented with paperwork. You don’t want to face the problems that will arise if the IRS catches you in a lie. Make it a priority to spend the time needed to evaluate your expenses and income so you can provide exact numbers for your tax preparer.

Tax Tips: Make Adjustments to Prepare for the New Year

After the stress of tax filing calms down, don’t assume you don’t need to worry about tax preparation or strategy for another year. Post-tax season is the perfect time to evaluate your systems and business practices. Often, business owners identified weaknesses in their financial systems, which are good indications of areas that need improvement to prepare for the next year.

For example, did you find that your books were messy when it came time to calculate expenses and deductions? If you spent hours crunching numbers and calculating all of these details by hand, then it is a red flag you need to improve your system for the future.

It is easy to procrastinate these decisions because you won’t feel the pain of tax preparation for another year. But you will do yourself a favor by implementing the changes right now while the information is fresh in your mind. Make a commitment to improving your accounting and bookkeeping system so you can save yourself the headache and stress when tax season rolls around in the future.

Year-Round Tax Strategy and Support

It’s amazing how much of a difference it makes when you are proactive and prepared for tax season. Too often business owners only think about tax strategy when the tax deadline is looming. But the best solution is to ensure you are working with your accounting team on an ongoing basis so that you are thinking ahead and prepared for the future.

Many business owners choose to implement a digital accounting and bookkeeping system. These software programs can be used to help you stay ahead of the transactions on a daily, weekly, and monthly basis. Then you don’t have the burden of sorting through a year of transactions when it is time to file your taxes. Instead, a simple report can be run so all of the essential tax information is ready at your fingertips.

Finding Support for Tax Preparation

You don’t have to file your tax paperwork without support. The best thing you can do as a small business owner is to outsource your tax strategy to a team that understands your business needs. At Easier Accounting, we are here to help. Call today to learn about the immediate and ongoing financial support available for your company: (888) 620-0770.

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