How Small Businesses Can Start Preparing for Next Tax Season Now
Tax Day 2020 has come and gone, but it’s never too soon to start planning for the next tax season. Based on your business type, you might have a different deadline than April 15, 2021 for your next tax return filing, so it’s important to work on your tax planning all year-round.
Here are three simple things you can do now to start preparing for the next tax deadline.
1. Keep a tax document checklist and calendar.
For many small business owners, paperwork and record-keeping is one of their least favorite tasks. Between managing employees, assisting clients, and more, it’s easy to let your tax documents get disorganized.
In order to ensure nothing gets missed come tax season, it’s important to keep a checklist of your tax obligations, potential credits, and deductible expenses organized together with supporting documentation. These documents may include:
- Records of expenses (any charities your business supported, professional development courses taken, equipment expenses paid out, business meals had, etc.)
- A copy of last year’s tax return
- Claimed federal or state credit documentation
- Documentation of federal and state tax payments made
- Names, addresses, and FEINs of vendors paid (to issue 1099-MISC forms at the end of the tax year)
- Unrecorded payments
- Loans or repayments
- Annual payroll records
You should also keep a calendar of important tax filing deadlines, such as your business’s dates for filing estimated quarterly taxes, annual returns, and payroll taxes.
2. Stay in-the-know about changing tax laws.
Federal and state tax laws are constantly changing, so it’s important to keep up to date as new regulations are passed, especially with the upcoming Presidential election. For example, in the wake of COVID-19, federal tax filing and payment deadlines were postponed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and many states followed suit. The CARES Act also introduced new tax provisions for payroll tax deferral, sick leave tax credits, net operating loss (NOL) carryback, and other forms of tax relief for small businesses for Tax Year 2020.
Important information about these changes and other evolving tax laws can be found on government websites, including the IRS website and the site for your state’s division of taxation. If you find it challenging to stay on top of these regulations yourself, a CPA firm can ensure your business properly files taxes in accordance with any possible changes.
3. Keep your books up to date.
Every business owner knows how important it is to keep detailed records of their income and expenses. Carefully tracking and documenting your business transactions ensures you can maximize your credits and deductions for the tax year.
If you’re managing your own books, a cloud-based accounting tool like QuickBooks, FreshBooks, Sage 50cloud, or Wave allows you to sync your business bank accounts, so you can automatically import and categorize your transactions, invoice your customers, and make vendor payments. However, you may find it easier and less stressful to simply outsource your accounting needs to a professional firm.
4. Hire a trusted CPA firm to help with tax planning.
Tax preparation can be intimidating even for the most financially-savvy business owner, and you shouldn’t have to face it alone. For expert assistance with preparing for next tax season, consult a trusted tax advisor like Miller & Company LLP.
In addition to advising clients on how to prepare for tax season, we offer small business accounting services such as business valuation, cash flow management, internal controls, and certified audits. Contact us today to schedule your consultation.