Monday, July 11, 2011

Prepare Your Small Business for Tax Season

Tax season can be stressful enough for one person with just their personal finances. But, when it comes to a small business's finances, tax season can be extremely stressful. So, just like you would with your personal finances, your small business is going to have to prepare for that dreaded date in April when taxes are due. Here are some things to help you prepare your business so you can tackle tax season head on.

You will want to get your records and books organized. This means getting any and all past tax forms, expense receipts, bank statements, invoices, and any other documents that you use for bookkeeping. Getting your records organized should happen way before tax season begins. You should keep all of your receipts for the year in one location. You can even digitally store all of your receipts, but you should still hold on to the original receipt in case something happens to your computer. Using file cabinets or binders to hold all of your documents can help your business out a lot when you got to file your taxes.

Be sure to contact a tax advisor. No matter how long you have been doing your own taxes, when it comes to a small business, you may want to have a tax advisor look over your taxes before you submit them. They will be able to help you get all of the proper tax deductions that you qualify for and hopefully help save your company money.

Get all of the documents that you need. For employees, you will need to send out their W-2 forms by January 31 and also send them to the Social Security Administration (SSA). The W-2 form shows the total wages that were paid and the amount of taxes that were withheld throughout the previous year. Along with sending the W-2 form to the SSA, you will also need to send a W-3 form by the end of February. The W-3 form shows the complete total of W-2s. For any contractors who have made at least $600 in the previous year, you should have a few things that you kept track of over the past year. Having records of their W-9 form, the contractor's business licenses and certifications can help you prepare a Form 1099-MISC to those contractors. This form must be sent to the contractor by January 31. It shows all payments that have been made to that contractor.

You may also want to do some research to find out what type of deductions you can use and if there are any possible write-offs that may apply to your business. This may include any new equipment your have bought, including a company car. If you aren't completely sure, ask a tax advisor. They should be able to tell you where you can save the most money. One deduction you may not have thought about has to do with your business insurance. For some business insurance policies, the insurance premiums may be considered as a business expense and therefore are tax deductible. If you have any questions or are worried about being audited, you should talk to your tax advisor or a trusted financial advisor.

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