With almost enough time into the new year for recovering from the holiday season, Tax Day fast approaches. No matter if you’re a new startup or a neighborhood fixture, there’s never a wrong time to establish good practices for record-keeping that will have you prepared to get the most from your fiscal year. When it’s time to file you’ll be ready for the task ahead, which is confusing enough. In addition to your listed expenses and organized receipts these guidelines will make filing as painless as possible.
Make sure to keep track of important dates and be certain of deadlines; these vary for different kinds of business structures. Additional types of tax payments, like payroll, have more frequent due dates.
If filing yourself, know the correct forms you need for your business, on top of your personal 1040. Sole proprietors report profit and loss on a Schedule C. Partnerships report income, losses, and expenses on a Schedule K-1, which is usually filed with a Form 1065. Corporations show gains, losses, income, deductions, and credits on Form 1120 or 1120S. You may also need special forms for specific situations, like a home-based business or self-employment tax.
As you become a record-keeping ninja, it’ll be much easier to gather the information you’ll need to file accurately and make the most of your deductions. Knowing what documents you’ll need is also helpful. Prepare in advance all income statements, payroll sheets, bank and credit statements, depreciation schedules, receipts for expenses and large purchases.
If you’ve been freelancing, even part-time, your income is taxable. The IRS expects you to pay roughly 30% of your wages (after deductible expenses) to be estimated and paid quarterly.
Operating or taking your business across state lines will affect your filing, and you’ll need to file for the states you’ve lived and have worked in. Different states have different rules but you should almost always be ready to pay sales, payroll, and property taxes. Additionally, whether or not certain types of debt forgiveness are taxable, as income, will also change by state.
In many cases tax filing can be straightforward enough to handle on your own, especially with good organization and preparation. But it may be worth hiring a reputable tax pro simply for the peace of mind in knowing that not only are your bases covered, but also you’ve exhausted every deduction and retained all that you’re entitled to.
