Whether you have been in business for decades or this is your first rodeo, filing a tax return as a small business owner can be…complicated. And, a little bit, or a lot a bit, stressful. It does not help that tax season begins soon after the holidays, which for many of us can also be busy and stressful time both at work and at home. Before you start to get too overwhelmed about filing your small business tax return, we want to give you a little bit of help.
We have a previous post written that lays out the steps for preparing a small business tax return, but here we have gathered a list of 8 things that you should definitely not forget to do when working on your 2019 tax return.
8 Things to Remember When Filing a Small Business Tax Return
1. Hire an Accountant
This is especially important if you do not have an accountant on your staff, however, many small businesses with accountants, still choose to look outside the company to professional accounting firms with CPAs when it comes to to tax time. A CPA can guide you the process of filling out the correct forms, help you make sure you are getting the most out of your deductions, and ensure that everything is done correctly. If you are not already working with an accounting firm, start the search now.
2. Don’t Forget about Independent Contractors
Hiring contractors or freelancers can be an excellent cost saving measure for small businesses. That said, just because they are not on your payroll doesn’t mean that you can forget about them during tax season. When you hire a contractor, you are required to fill out a 1099-Misc form and send it to both the IRS and the independent contractor. Failure to do so could result in some hefty fines.
3. Claim all Income
This may seem like an obvious thing, but it is still a very important one to remember. Self-employed individuals who are on the receiving end of 1099-Misc forms need to be particularly aware of this. Any income over $600 is being reported to the IRS by the hiring company, which means that whatever you report on your tax return should match what was reported by the payer.
4. Keep Track of Pertinent Records
Ideally, you should be keeping track of records throughout the year. These can include payroll, income and expense reports, employment records, travel receipts, deposit slips, invoices etc…. If you haven’t been diligent about keeping track of everything, now is the time to start gathering what you may need. Communicate with your accountant about what documents will be necessary for your tax return this year.
5. Gather the Correct Forms
Unfortunately, there is not just one “Business Tax Return” form. Different forms are required for different types of businesses. Whether your business files as a C-Corp, S-Corp, or a partnership will affect which forms will be necessary. Do your research and double check with your accountant before putting pen to paper because you do not want to make a mistake with this. Don’t forget about state and city forms as well.
6. Give Yourself Enough Time
We know tax day is not until April, and that may seem like a very long ways off now, but it is important to give yourself time. Don’t procrastinate filing your small business tax return. Allot yourself ample time to look over all the forms, make sure you have all of the necessary information, consult with your accountant about documentation, and gather everything up. This all takes time–especially when you are also trying to successfully operate a business.
7. Make sure you have a TIN
TIN stands for Taxpayer Identification Number, and one is needed for individuals and businesses filing tax returns. Most individuals can simply use their Social Security numbers as their TINs, but many businesses need to apply for an EIN (Employer Identification Number). The IRS offers helpful information about how to do so, and even offers a link so you can do it right online.
8. Know your Deadlines
For businesses that follow the calendar year, April 15, 2020 is the deadline for individual tax returns, C corporations, and Sole Proprietorships. S Corporations and partnerships are due one month prior, on March 16, 2020. Businesses that follow a fiscal year calendar have different deadlines depending on their fiscal year. Click here to see the IRS guideline on fiscal year deadlines.
Other Things We Would Not Want to Forget During Tax Season
As overwhelming as it can seem, don’t forget to take a deep breath, because you will get through it. Simply start early, work closely with an accountant you can trust, and do your best to stay organized. And, even though tax return season is coming, take the time to still enjoy the holidays with friends and family.
Looking for help with your taxes this year? Contact us at Lumen Advisory and Finance!