Whether you’re a seasoned businessperson or you’ve just set up shop, filing your small business tax return can sometimes prove to be a tough nut to crack. However, it’s important to pay your taxes on time to avoid incurring serious penalties and court cases. The IRS takes its job very seriously. And although your main goal is to turn healthy profits, defaulting on your taxes simply won’t cut it – you’ll get into more trouble than you anticipated.
Luckily, you can outsource professional tax preparers and allow them to get rid of all your tax worries. These accountants in Chicago will help prepare your tax returns accurately and efficiently.
Here are 5 tips to completing your small business taxes in 2018:
- Understand the appropriate forms to fill
If you’re running a small business, you’ll definitely need to identify the right tax form to fill. The IRS requires each business to report accurate business earnings and pay taxes. However, the specific tax forms used by a business heavily depend on its structure. Sole proprietors are required to attach a Schedule C form onto their personal income tax returns. This form highlights all business expenses and income. Partnerships, on the other hand, need to fill Form 1065.
- Keep your personal expenses separate
You might be tempted to use your individual credit card to make purchases for the company. Sadly, this isn’t a good idea – it could cost you dearly once the tax-filing period finally arrives. All deductions you make when filing your small business taxes are specifically for your business. Personal expenses cannot be deducted. Here’s a great technique to separate business and personal expenses: request for a separate credit card for your business.
- Categorize your office equipment properly
Many business owners often get entangled in a catch-22 when it comes to classifying their expenses as either supplies or office equipment. The two are slightly different. Equipment are generally high-value items such as office furniture, computers and servers. These items typically last longer than 12 months. Supplies refer to those items used over the course of one year. These include pens, printer papers and ink.
- Organize your paperwork using a good filing system
Most people are often caught unprepared during tax time, prompting them to pay more fines. However, getting more organized could actually allow you to claim fewer deductions and save you more money come tax season. For starters, you could get 12 expandable folders (one for every month) and label them accordingly. File every bank withdrawal slip, deposit slip and receipt into the relevant folders. In addition, try setting aside a couple of hours every month to organize files and documents into the appropriate folders.
- File your small business taxes on time
Needless to say, you need to file business and personal tax returns right on time. Failure to meet the prescribed deadline spontaneously attracts huge fines and penalties. For instance, when you fail to file certain taxes 60 days past the deadline in the US, you attract a penalty of $205 or more. Naturally, you wouldn’t desire to be embroiled in a court case due to late tax payments, so it’s wise to strike the iron while it’s still hot.