If you’re at all like many small business owners, this past tax season was probably pretty hectic. Rather than panic when tax season comes back around next spring, follow these basic tips to make life a little easier on yourself and your staff.
Keep Accurate and Complete Records
This is number one on our list for a reason: inaccurate and/or incomplete record keeping is one of the biggest downfalls for small businesses when tax season rolls around. Many owners or bookkeepers still rely on paper records in the form of receipts or bank statements rather than using effective and affordable software. Keeping hard copies of small business records is terrific, but those pieces of paper should be kept as a means of substantiating and reinforcing what you have stored on the software platform of your choice. This ensures accuracy and helps prevent annual panic over where records are stored and headaches from the massive chore of having to sort everything out.
In addition, online financial records can often be linked with tax preparation software, eliminating the time-consuming data entry phase of tax prep. Streamline the process by collecting and protecting your records on an easy-to-use software platform.
Review and Understand Previous Returns
In many cases, small business owners are so relieved to have filed their tax returns on time that they don’t bother to ask for and retain a copy for their own files. We understand that reviewing your financial records can be cumbersome and anxiety-inducing, but it’s important to confront your tax situation head on.
Your tax return and accompanying work papers are neat and concise snapshots detailing the strength of your business, so be sure to go over them carefully to see where you succeeded over the previous year and how you can improve going into the upcoming year. It might even be wise to review your return with the tax professionals at S.H. Block Tax Services in order to make a sound financial plan for the upcoming year and to avoid consecutive annual losses, debts, or delinquencies.
Classify Contractors and Freelancers Accurately
Many small business utilize contactors and freelancers to assist with the heavy lifting of their day-to-day operations; however, these individuals are very different than regular employees from a tax standpoint.
The IRS and State of Maryland pay very close attention to how small businesses classify their staff, so be sure to provide W-2s for employees and 1099s for freelancers outlining their earnings no later than February 1 of each year. Individuals whose 1099s fail to match those in the IRS’ database could be subject to an audit, so encourage contractors and freelancers to be as accurate and truthful as possible when compiling and completing their annual tax returns. If these individuals’ employment status changes at any time during the year, be sure to update accordingly.
Pay Quarterly Taxes
While most small businesses may not be legally required to pay quarterly taxes, it’s still a smart approach to get ahead of any potential issues that might become apparent at the end of the year. Quarterly payments are due on the 15th of April, July, October, and January. These payments should be made to satisfy both federal income tax and self-employment tax obligations. Failure to do so could result in penalties for underpayment, even if the balance due for the year is paid on April 15. You should consult with a trusted tax professional such as those at S.H. Block Tax Services to schedule these payments and make sure the balance is paid accurately and on time.
Contact S.H. Block Tax Services for Help with Your Small Business Tax Needs
Keep the tips above in mind throughout the year in order to avoid any potential headaches during tax season. Delinquent taxes and liabilities can quickly get out of hand, so vigilance is critical and compliance is mandatory.
Please contact S.H. Block Tax Services by calling (410) 793-1231 or completing the brief form on this page for help with your small business taxes, and do so immediately if you are receiving threatening letters, phone calls, or visits to your business from the IRS. We offer free consultations, and we have decades of experience helping small businesses remain in compliance with federal and state tax regulations.
Our clients are the core of our business, and we will work tirelessly to assist you in dealing with your small business’ unique tax concerns. Please contact us today to learn how we can help!
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.