The tax season cometh; tips to prepare
January 17, 2021
The mere mention of tax season can send even the bravest, risk-taking small business owner into a state of panic or dread.
Reconciling how much you owe and what to deduct may not be fun. But with the right systems in place, you can avoid getting into a tailspin about your business taxes every year. The best part of all? Once you put an effective process in place, you can set it on autopilot and lightly manage it over the course of the year.
The issue: Where do I even start?
The fix: Get your ducks in a row.
Your business taxes rely heavily on paperwork. So, hunt and gather any documents that are related to your business. This can include receipts, statements, donation letters and last year’s tax return. And put everything in a dry, secure place such as a file organizer or filing cabinet. Further, make a list of the tax documents you expect to receive such as W-2s, 1099s, 1099 Rs and 1098-Ts. Make sure you obtain all the documents on your list, and if you haven’t yet received them, contact the record holders about how you can access them.
Related: 4 Smart Ways to Stay on Top of Your Property Taxes
The issue: I know little or nothing about taxes.
The fix: Hire financial pros to help you.
Now that you’ve gotten all your documents together, this is a good time to get in touch with a tax preparer. Don’t have one? Ask friends and family for a reference, or tap fellow small business owners for recommendations. As an entrepreneur, another financial pro you’ll want by your side is a tax accountant. Specifically, you’ll want someone who is well-versed in your type of business, be it retail, wholesale or any other field. You don’t want to skimp on hiring seasoned pros because they know the ins and outs of the often-complicated world of deductions and general tax law. While it’s an investment up-front, they can save you a lot of money for your business in the long run.
Related: 5 Financial Planning Questions Small Business Owners Should Ask Themselves
The issue: I’m busy, this can wait.
The fix: Don’t delay. Or you will pay for it.
Many of us have been there. Tax season can seem so cumbersome and undesirable of a time that we’ll likely to just put it off. Fight this urge. Procrastinating can increase your odds of making mistakes or filing late, which can incur late fees and penalties.
The issue: How do I avoid panicking every year?
The fix: Prepare for the upcoming tax season — now.
If you find yourself in a frenzy over your business taxes now, channel that frustration toward ensuring you don’t feel like this ever again. You can achieve this by setting up a system that will make things easier for you moving forward. If you expect the same types of documents to arrive every year, make a checklist you can refer to every time. The same goes for everything else. Do you like the financial pros you use? Pre-schedule meetings with them for the upcoming tax season. Is your business driven by receipts? Designate a place where they live and keep that file organized year-round.
FE Small Business Finance is not just a small business lender. We are an advocate. We furnish entrepreneurs with affordable financing that sustains their long-term growth. We also offer free, professional business advising to potential and current borrowers before, during and after financing to boost their odds of success.
Tell our loan experts about your business, and they’ll work to match you with a financing plan that best suits you. Let’s talk! Reach us at email@example.com or (619) 243-8667.
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