Running a business becomes more complicated at the time of tax filing.
The thought of tax preparation alone is enough to cause an uneasy dread amongst individuals let alone business taxes.
This is why it is emphasized that you continue working with an accountant throughout the year and not just during tax season.
Tax preparation ensures your documentation and finances are organized and error-free.
This way, the time spent on preparation and filing for taxes is also less.
There are a few tax preparation resources available that you can leverage to reduce the stress. This post is one of those resources.
Let’s explore them with a few actionable tips for better tax planning.
Key Takeaways
- Tax preparation is time-consuming with many small businesses spending an average of 80 hours on it.
- Outsourcing your tax preparation helps you save time and leverage all tax deductions.
- Resources like AICPA listings and free courses will help you effectively with tax preparation.
- It is important to estimate correct tax returns and for that keep your personal and business expenses separate.
Tax preparation for small businesses – here’s what you need to know
Learning to do your taxes can be painful. The process is time-consuming and exhausting, especially if you aren’t tracking or updating your records throughout the year.
Let’s take a look at some figures:
- According to a survey by Small Business Taxation, one-third of small businesses spend an average of 80 hours on tax preparation.
- The same businesses pay $5,000 or more in federal taxes.
- While 60% of small businesses consider the administrative burdens their biggest challenge, 40% think it is the financial strain that they find most difficult.
Tax preparation becomes the most dreadful task for small business owners as they get intimidated by the complexity of information.
But there are some ways you can make it easier.
It is important to select the right tax form for your business type.
This way you will only pay for the taxes you are responsible for – not any more or less, ensuring tax compliance with no possibility of incurring a penalty.
Make sure that you take complete advantage of whatever tax deduction you are eligible for, and for that, you need to develop a strong grasp of the tax and legal infrastructure.
Go through your financial records in detail to find out any area or specific credit you’re eligible for.
Now, this step is necessary because you want to save as much of your hard-earned money as possible.
It’s better to opt for an online platform to file your tax returns instead of physical paperwork as it helps you avoid calculation mistakes and human error.
And if you outsource your tax preparation, make sure you ask them for a tailored tax solution.
A professional has the knowledge and expertise to help you count every single tax liability and save every penny possible leveraging all eligible deductions.
Benefits of preparing ahead of tax season
- Tax preparation and planning ahead help you stay focused on your core business strategies even during tax season.
- When you’re constantly tracking your finances and preparing ahead, you are also aware of the changes in the tax structures. So, no change comes as a surprise at the time of tax filing.
- It helps in keeping your documentation consistent, accurate, and organized.
- Preparation gives you knowledge, and this knowledge will help you save money by leveraging all tax deductions.
- Preparing ahead keeps the process trouble-free and avoids penalties.
6 tax preparation resources for small businesses
Having access to the right information is essential for tax preparation.
With so much clutter and constantly changing tax structures, getting insights from a credible source is crucial in ensuring you file your tax returns correctly.
Here are the top tax preparation resources for small businesses.
1. Partner with Ledger Labs
I keep mentioning the importance of hiring a professional for tax preparation and filing.
Now let me explain why it is important.
First of all, we at Ledger Labs have all the necessary information that you need to file your taxes correctly.
We’ll help you identify all the tax deductions you qualify for so that you can save as much money as possible.
In addition, we know which form to file depending on your business type and size.
It saves you time and energy. And what’s important is that the process becomes efficient and you’re not wasting your time just beating around the bush.
And that is where the Ledger Labs role comes into play.
We have been helping businesses across industries and types for over 12 years now.
Getting professional assistance means you prepare and file your tax returns on time and accurately, avoiding penalties and unnecessary costs.
2. Use e-File.com
If you want tax estimations, professional advice, and free audits, eFile.com would be your best choice.
This resource provides transparent pricing for every business type and size. The information is available in simple and easily understandable words.
The only problem with e-File.com is that you won’t find information relevant to a C corporation. Thus, Form 1120 is not available here.
3. Check AICPA listings
Now, it is clear and undeniable that you need an accountant to help leverage various deductions and reduce tax liability as much as possible.
They have the knowledge and training to guide you through this complicated process.
While you can do it on your own, it will be extremely time-consuming and take your focus away from your actual business.
And not to forget, you are more likely to mistakes along the way.
This is why you can consult with the American Institute of Certified Public Accountants.
They have a list of accountants and companies with legitimate reviews to help you handle sensitive information.
4. Get help from small business and self-employed tax center
You have various options to help you with tax preparation, like the Small Business and Self-Employed Tax Center.
This is a non-profit organization helping small businesses access business forms and documentation like excise tax forms and tax provisions.
You can decrease some of the administrative burden by using this resource for tax files and paperwork.
They have a centralized and systematic filing system to guide you about files and requirements relevant to your business type and size so that you file tax returns correctly.
5. Take a free course from small business administration
I would highly recommend that you get professional help for tax filing even if you are a small business.
But if you can’t afford it right now, you do have an option like getting a free course from Small Business Administration.
Although it’s brief, this course gives you basic information regarding tax preparation and its filing.
All you have to do is go to its search bar and enter “Tax Planning and Reporting for a Small Business”.
The link to this course will be the first option on your feed.
In its first section, it clearly explains how this course will benefit you.
Make sure you understand that this free course will simply give you a headstart because something is better than nothing and you don’t want to file your business taxes without any knowledge.
6. Read Thomson Reuter’s 1040 Quickfinder handbook
Of course, outsourcing your tax preparation is important.
But you should also know that every good tax preparer has one guide on their bookshelf: Thomas Reuters 1040 Quickfinder Handbook.
It covers almost everything that a good tax preparer should know.
And the best thing about this manual is that the information is conveyed in simple terms.
4 actionable tips for tax preparation
Here are 4 actionable tips to ensure you prepare for tax the right way.
1. Keep your personal and business incomes separate
The one common mistake most small business owners make is that they mix their personal and business expenses.
Whether the report is correct or not, the IRS would not be happy if you show any signs of commingling personal and business expenses.
What I recommend is that every business owner should have a separate card for personal and business use.
2. Wrong calculations
Most businesses fail to understand the difference between net and gross income. Here’s an example.
If the cost of your product was $100 and you sold it for $150, $50 will be your gross income. However, if you deduct the expenses, this amount can drop to $10.
You should know exactly how much you are making to provide exact figures and stay compliant come tax season.
3. You should know your business type
If you don’t classify your business correctly, you could possibly overpay your taxes.
You have different business entities, like S corporation, C corporation, LLC, and sole proprietorship. Now, every business type has a different tax form and eligible tax deductions.
If you don’t leverage this information, you could end up paying more than you are supposed to.
Thus, make sure you classify your business right.
4. Get payroll services
The best thing that you can do for your business is to outsource your taxes to a service that also provides payroll solutions.
When the same dedicated team handles your payroll, the process of tax preparation and tax filing becomes easier.
The bottom line
Tax preparation is the first step to filing accurate tax returns.
Failure to file accurate and timely taxes can result in penalties and unwanted expenses.
We at Ledger Labs use advanced tools and the lat
est knowledge regarding tax structures to ensure you file accurately and efficiently.
Book a consultation now.
