Filing tax returns is a very important aspect of running a business. For a lot of businesses, the act of filing taxes is either sidelined due to operational pressures or management is stuck without an idea of how to go about filing.

These days, just about everything is taxable. As a result, it is essential for a business to be tax efficient. Investors also want to invest in companies that are responsible with their taxes. 

As a business, here are some of the important things you should pay attention to for tax returns filing:

Know Your Deadlines

Deadlines. One of the most important factors when preparing to file your tax returns. Without knowledge of your deadlines, it is impossible to adequately plan for the tax season. Getting caught unaware, or rushing to meet deadlines, is overly stressful. You should already have your paperwork ready. 

This way, you can meet the tax returns filing date while having extra time on your hands. Most small business owners make the mistake of waiting until the 11th hour before diving into a rush. Not knowing your deadlines puts you at risk of making woeful errors or missing the deadline completely.

Knowing your deadlines helps you to achieve the following:

• Stay organized
• Ensure that your accounts are up to date
• Hire an accounting firm if you’re unable to do this on your own

Understand All Necessary Tax Forms

One thing that most business owners forget to plan for is filing taxes. Tax planning is different from filing. It’s strategizing your day-to-day financials in a way that accurately prepares you for your tax burden. Paying taxes is (obviously) very important. Preparing for them helps you pay the right amount — no more, no less. 

In addition to deadlines, planning out your taxes involves gathering all necessary forms. While it is pretty easy to check up this information on the internet, adequate preparation is required. The structure of your business will determine the kind of tax forms that apply to you. Your best bet is to hire a professional accounting firm to help you out.

As you prepare to take that step, here are some tips to help you:

Understand and optimize your business structure for tax purposes 

It is very likely that you have already done this. There are different kinds of business structures including sole proprietorship, partnership and Limited Liability Company. Each of these entities has different financial, legal and tax benefits and obligations. 

Here are the forms that you should fill depending on your business structure:

• Sole proprietorship – 1040 C-EZ or 1040 Schedule (It also applies to self-employed individuals)
• Partnership – Form 1065
• Corporations – Form 1120
• S-Corp – Form 2553

Keep your paperwork organized 

It is important to note that the Federal Government never gets involved in creating a structure for your business. However, it will be responsible for issuing you the company’s Employer Identification Number (“EIN”). Your business is required to obtain this number when it is formed and it will be used to identify the company on all future federal tax filings.

Understand your employment tax requirements

If your business is large enough to employ staff, you need to file different forms on their behalf. Engaging an Accounting Service helps to handle tax issues involving your employees. Some of these include W-2 forms and quarterly tax filings. Ensure that you get the required forms for your employees to fill out. This will help you to avoid future embarrassment or liability and the penalties for messing up and not paying these taxes appropriately can be hefty.

Know your form filing requirements for contractors

If your business is hiring independent contractors at any stage, you must file Form 1099-MISC or the new Form-NEC. This is necessary for any person that your business pays a minimum of $600 in a year. As a matter of best practice, you should always collect a W9 from your contractors prior to making any payments.  This will ensure that you have the appropriate information you need for their year end filings. You must not make payments until you are sure that these forms are completed and safely stored for the end of the year.

Update and Collect All Financial Records

It’s wise for a business to employ the services of an accounting firm to file their tax returns. You avoid unnecessary mistakes, often save undue fees as well as reduce errors that alert tax authorities. One important ingredient needed by every tax accountant is the right records. Without these records, you cannot be ready for the tax season.

Here are some of the financial records that you must collect and update (if applicable) in preparation for the tax season:

• Payroll information (for businesses with employees)
• Financial statements (this should include profit/loss statements, cash-flow statements and balance sheets)
• Asset disposals or additions during the year in consideration. This includes vehicles, buildings, machinery and land
• Motor vehicle expenses. This covers auto expenses, operating expenses and vehicle driving log along with the business miles driven
• Business expenses (advertising expenses, travel expenses, office supplies, raw materials, rent, shipping, utilities, etc)
• Receipts for business expenses over $75

Collect and retain documents to support your deductions

There is good and bad news about the costs your business incurs at startup. First, the bad news. You’re still spending money on your business and decreasing your overall profit. On the other hand, you can make use of these costs to lower your business taxes if the amounts you’ve spent are for legitimate business expenses. The problem most businesses face in this regard is that they don’t have an idea what to deduct.

There are certain startup costs that you are allowed to deduct in the first year of operating your business. For some other costs, you have to spread them out over a number of years. Of course, this is pretty complicated but getting the required documents to support your deductions makes it a lot simpler.

Avoid Common Myths/Mistakes

There are many myths about filing tax returns. You must avoid these myths as well as other mistakes. Don’t treat filing taxes as just another business chore to cross off your to-do list. Doing this will expose you to errors that could cause your business a lot of trouble in the future.

Here are some of the most common errors that you must avoid:

• Underpayment of estimated taxes
• Filing your taxes late
• Not effectively separating personal expenses from business expenses
• Failure to deposit employment taxes
• Not understanding your tax obligations as a business owner

When you are aware of these mistakes and myths, it saves you from errors or wasting time. It also protects you from violating tax codes and makes it easier to comply with the necessary tax laws.

Pay Attention To Payroll Taxes

Staying current when it comes to tax obligations at different levels is one of the challenges of businesses. One of your major obligations as a business owner, if your business has employees, is payroll taxes. You should withhold payroll taxes from the paychecks of your employees. These taxes should be paid to the Local, State and Federal tax authorities.

Some of the taxes that should be withheld include:

• Social Security taxes
• Medicare
• Local, State and Federal taxes (where applicable)

One question begs an answer, “how do you calculate payroll taxes?” Here are the three steps involved:

• Determine who your taxable workers are
• Figure out the taxable wages
• Calculate the withholding amounts

We all know how difficult and confusing the calculation of payroll taxes can be. As such, it is wise to employ the services of an Accounting Service to assist you. This way, you won’t have to deal with late fees or penalties.

Begin Tracking Your Finances Properly

You now understand what it takes to handle tax returns filing for your new business. We can guess that it is still a little confusing especially when it comes to tracking your finances properly. The good news is that you don’t have to do this by yourself. 

Simply reach out to Davis Crawford Accounting and Tax and we will handle it all from start to finish on your behalf.