As an entrepreneur, taxes can be one of the biggest distractions in your life. It can be time-consuming, confusing, and ultimately stressful. Small businesses are more vulnerable to tax changes than large ones. A recent CRA study found that the most significant tax changes were those affecting the small business deductions.
The small business tax preparation checklist is a kind of a guide to help small business owners learn the most important things to know about the tax preparation process. So, if you want to get your completed forms to the IRS promptly, and without any mistakes, we will walk you through the small business tax process step-by-step so that you can get your returns done in a timely and accurate manner.
Tax Preparation Documents for Business Owners
Tax preparation is complicated. First, it is complicated because it requires a lot of understanding of business rules and regulations. Second, it is complicated because it requires a lot of understanding of tax law and third, it is difficult because you need to understand a lot of tax returns. This checklist will help you understand which documents you need to send to the IRS and which you don’t.
Find Out When to Do Various Tax-Related Actions
The IRS will send you a letter that says you owe money and you need to do several things to pay it. These steps may include applying for a tax-exempt business, filing a business income tax return, filing a federal tax return for the year, filing for a state tax refund, filing for a federal tax return, and filing for an individual tax return. To get things started, here’s how to do some of the things that the IRS asks you to do. There are specific times for filing tax returns for small businesses: April 15, the deadline for most individuals, and May 15, for businesses with a payroll.
Some businesses have tax information due on the same day as their 1040 filing; still, others have their information due two weeks after their 1040 filing. For these businesses, the possibility of missing a tax deadline may seem remote, but if it does happen to them, it could have a significant negative impact on their income taxes, their credit scores, and their business prospects.
Here are tips on tax deadlines:
- If you have not prepared your return by April 15, it is too late to file. The penalty is $25,000. A penalty is also assessed on businesses that do not file their returns by April 15. If you’re not sure if you have filed your return, ask your accountant for a copy of your return, or a copy of your client list. This rule is related to sole proprietorships, single-member limited liability companies, and C corporations as well.
- The tax return for small businesses set up as S corporations or partnerships is generally due on March 15.
Collect Your Business Records Relating to Income
It is essential to not only provide accurate information to the IRS about your small business’s income but also to be able to back up that information with documentation. The IRS has methods of checking the numbers you report, so it is vital to be truthful. You should keep records of your gross receipts from sales to document your taxable income. This includes any returns, refunds, or interest and investment income from financial accounts in the name of your business.
Prepare Documentation for Business Expenses
Tax breaks are important. Very often receipts can be sufficient. However, for certain deductions, you need more extensive proof. They could be transportation, home office deduction, small business health insurance expenses, and meals and entertainment. If you don’t have proof of your tax benefits, you aren’t eligible to take advantage of them. What do you do if you don’t have proof of the tax breaks you’re eligible for? The government says that you can use an online submission form to provide proof of your tax benefits.
Get an Extension
Many small business owners can get an extension on their taxes by missing the deadline a couple of times. To get an extension, you must request one on IRS.gov at least three days before. If you miss the deadline, your taxes will be due for the whole year and you will be charged a late-filing penalty. you can get an extension on the taxes that you owe by filing an extension with the IRS on the online form. Extensions for small businesses are designed to give everyday access to the tools they need to set up a tax filing system for their business.
Get Tax Forms You Will Need
Though we are all familiar with the “Form 1041” for business income, the top tax forms for small business owners are more complex. The most common forms are Form 1040 or 1040A, Form 1040EZ, and Form 1040EZ-EZ. The 1040 or EZ are for business income taxes, and the 1040EZ is for business taxes only. The 1040A is for personal taxes, and the 1040EZ-A is for income taxes only. Yes, it is a bit confusing and it is important to have the right tax form to meet the rules.
Choosing the right tax form means you have a choice in how to prepare your taxes. There are many options, and you need to research and understand them to determine which is best for you. There are two types of small business tax forms: Simple and complex. The simpler forms are the C corporations and the S corporations. Each form is for different types of business entities. A-C corporation is a company that has a profit motive and a separate set of books for its shareholders.
If your business has employees, you may need to file both a Form 1040 and a Form 1040A. For example, with the help of a pay stub, you can ensure that you’ve paid all the right taxes when you file your taxes. This includes income taxes, payroll taxes, and self-employment taxes.
You can use the simple 1040 form for sole proprietors and the Form 1040A for businesses that have employees. You can also use the 1040 EZ form for smaller businesses. To choose the right form for your needs, you need to understand which form is designed for your needs, and what is involved in using the form.
Send any required information returns, and make sure you get the ones you need
For example, small business owners that have employees need to provide W-2 forms as well as their copies to IRS, and local and state tax officials. Also, they receive information from parties they do business with regarding fees for services, paying interest on loans, rent on the rental property, etc. So, there are lots of information returns that apply to various types of businesses.
Tax preparation has to be done. If you want to put yourself in the best position try to follow above mentioned simple tips to get your taxes prepared correctly and quickly.