7 Tips to Start Preparing Your Small Business for Tax Season
Tax season will be here before you know it, but don’t wait until then to start preparing. If you wait until tax season starts, you’ll be scrambling and hoping you have everything you need. If you start preparing at the end of the calendar year, however, you’ll be ready and can rest easy during tax season. Keep reading to learn seven tips for preparing your small business for tax season.
1. Review your books
Look at your financial statements to ensure everything is in order and that there are no surprises. If someone else handles your records, schedule an appoint with them to go over everything.
2. Review your bank statements regularly
When you get a new bank statement, don’t just throw it in a pile to look at eventually. Instead, review the report to make sure you can account for every transaction. If you don’t know what a transaction is, it’s easier to figure it out soon after it hits your bank, instead of three months from now.
3. Track everything
If you haven’t been tracking every expense and every business mile driven, start now! It’s better to begin tracking late than not to track at all.
Read also: How to Deduct Mileage: Standard Mileage Rate vs. Actual Expenses
4. Update your workers’ information
Before the end of the year, check with your employees and independent contractors to make sure you have everything you need to file Forms W-2 and 1099-MISC. You’ll need things like their address and their Social Security Number (SSN) or taxpayer identification number (TIN).
5. Know what forms to file
Make sure you know what forms you’ll need to file.
- If you paid employees during the year, you’ll file W-2s.
- If you had any contractors, you’ll file 1099-MISC forms.
You’ll also have to file income tax returns for your business. Your business entity type will dictate which form you need to complete. Learn more about income tax forms for small businesses.
6. Put due dates on your calendar
April 15 is probably permanently stuck in your head, but not every form is due on that date. Before tax season starts, make sure you know when each form is due, so you’re not caught off guard.
Read also: Tax Due Dates
7. Consider filing an extension
If you think you’re not going to be able to file in time, file an extension. For many income tax forms, you can file for a six-month extension to give yourself some more time to get everything done.
Read also: You Missed the Tax Deadline. Now What?