An accounting department is necessary for any company, as they oversee the flow of money that enters and leaves the organization. It is particularly crucial for small businesses during the tax season.
Although the tax deadline is in April, a business enterprise should start organizing every single last and necessary file now. Doing so will guarantee that you will be prepared well in advance of the deadline, and you don’t need to scramble to do it last minute.
Plus, you will have to look back at all of the expenses your organization has made within the last year. Have you acquired any commercial loans? What about equipment loans? Every single purchase and outstanding loan will have to be accounted for.
Below is a detailed overview of how your small business can prepare itself for tax season.
Ensure the finance department is organized
The very first order of business is to ensure that your finance department is organized.
This means that the accounting team must prepare for it along the way, and not leave anything to the last minute. For instance, have the financial experts been keeping tabs on the various business loans that you have accumulated?
Determine the type of tax return you should file
It is incredibly important that you are aware of what type of tax return you should file, as a company.
The type of structure that your company falls into will determine the way that it is taxed. If your company is a sole proprietorship, your company and individual taxes are not separated. A co-operative structure, on the other hand, requires its members to pay some taxes on cooperative gains. Then, there’s the C-style corporation, and this can include a mixture of federal, state and local tax taxes.
There are other structures to account for, and each one has its own unique tax filing laws and regulations that it must adhere to.
Gather all the necessary documents and files
The tax documents that you must submit will take into account the point above: the structure of your business.
It is crucial for your company’s accounting department starts collecting all last-minute and additional files that they would need to account for while submitting taxes. It could include credit card summaries, business records and expenses, and so on.
However, this step is in addition to the organized financial files that you should have been mindful of from the very beginning. Consider these documents and files to be any last-minute additions that you realized you need to add into the mix.
Possibilities for deductions
No company wants to lose money, as the entire goal is to make a profit whenever possible. When tax season arrives, consider what type of tax deductions your small business can make in order to benefit your monetary standing.
What is the rent that you pay for your current office building? What about utilities? Have you had to spend an excess amount of money on repairs this year? Even payments that you make to your employees can be added as a deduction during tax season.
More so, there is a good chance that you have sought financing for equipment loans, and the cost of supplies and items that you have used in your organization’s operations is yet another example of a tax deduction.
There are several that you can account for, and you should thus consider as many as possible, as you always want to lose the least amount of money possible as a business.
Use accounting software programs to your advantage
Given technology innovation in this day and age, there are plenty of accounting software programs that finance experts can use to make their lives easier!
To ensure that there are no errors with any of the data that you have input, it would be worthwhile to invest in a specific software program for tax season. Not to mention, why spend countless hours organizing the data you have inputted, when you can produce the results you want with a few clicks of a button?
There have likely been so many loans and interest rates on business loans throughout the past couple of months; it will be hard to organize everything without the additional support of a software program.
Efficiency in the workflow is something that every single organization wants to prioritize, and there is an easy solution that will help you achieve this. When the resource is there, why not use it to your advantage?
Keep the deadline in mind
Even though your tax deadline may be several months down the line, it is never too late to start preparing for it!
The sooner you put together all of the files that you need, the easier time you will have when the month of April finally arrives. You don’t want to scramble last minute to file your taxes, as this could make you miss key tax deductions that you otherwise would have made a note of.
In fact, you should keep in mind and live by the words of the following quote:
Diligence is the mother of good luck – Benjamin Franklin
Penalties for neglecting to submit business taxes
If you fail to submit your taxes on time, your company will face penalties. Some of these will be financial in nature, and the longer you wait, the higher the cost that you will incur. The good news is that you do have the possibility to file for an extension, but you can’t wait until the last possible moment to do this, either.
Rather than racking up numerous fees, do yourself a favor and file your taxes ahead of the deadline.
There isn’t a single company that is exempt from tax season. Everyone has to pay their dues, although these will vary depending on the structure of your organization. An LLC type company, for instance, will require the owners to pay individual taxes as opposed to dealing with the traditional corporation style tax files.
Remember that organization is critical, and make a note of the expenses that your business has accumulated thus far. The loans and funds you obtained, and especially the interest rate for business loans you accumulated, must be kept top of mind during tax season.