There is always one season that everyone forgets – tax season. While it may seem like you have plenty of time to prepare, small business tax season sneaks up on many owners who often find themselves overwhelmed with the process. This year, don’t fall behind, and make sure your small business is prepared when the time comes to file tax returns. Here are some steps you can take to guarantee your small business is ahead of the game when tax time comes around.
1. Know your deadlines
Early in small business tax season, you have an obligation to send out W-2s to employees and 1099 forms to any contractors you worked with within the previous year. Your last estimated quarterly tax payment for 2021 is also due in January. Depending on your business activities, you may have additional 1099 forms due as well.
• January 18 – Fourth and final estimated quarterly tax payment
• January 31 – W-2’s due to employees, 1099 forms due to contractors
2. Compile financial documents
One of the biggest and most important ways you can prepare for your small business tax season is by gathering all of the business’ financial documents. Keeping your small business’ paperwork organized will provide accuracy and efficiency when filling. Also, don’t forget to keep personal and business records separate. Important papers to make sure you have ready for taxes are:
• Balance sheets
• Income statements
• Payroll records
• Bank statements
• Credit card statements
• Previous tax returns
3. Look for deductions and credits
Depending on the type of small business you have, you could potentially qualify for tax deductions and credits, which will lower your tax liability; however, be certain that you have the necessary documents to back up the claims. Keep in mind that the IRS also has certain rules for specific deductions and credits, so always check that you are meeting requirements. Here are some deductions and credits your small business might qualify for:
• Professional/legal expenses
• Employee payments
• Advertising expenses
• Charitable contributions
• Startup costs
• Health insurance
• Paid family and medical leave
• Work opportunity
• Disabled access
• Research & development
• Employer-provided childcare
• Alternative fuel
• Social security and Medicare paid on tips
• Pension plan startup costs
• New market investments
4. Determine your tax filing deadline
Verify that you have the correct date for when your small business’ tax returns are due. Similar to how each business structure has to file a different tax return form, each business also has a different filing date. The tax return dates below qualify for businesses that follow December 31 as the end of the tax year, and if the deadline falls on a weekend or holiday, you have until the next business day to file. Determine your small business’ tax return due date:
• Multi-member LLCs
• S-Corps filing Form 1120-S
April 18 (extended this year since Friday, April 15 is an observed holiday, Emancipation Day)
• Sole proprietors
• Single-member LLCs
5. Consult financial experts
Running a small business is a big job, so don’t put more pressure on yourself by being unprepared for when it comes time to file taxes. The numerous amounts of required forms and documents may seem daunting to many, so look into finding tax experts, such as those at Emerald Financial Partners, to assist you in the process. The team at Emerald Financial Partners will navigate you through the small business tax season and the return process to ensure your business taxes are being filed correctly.
Contact Emerald Financial Partners today to get started with your small business’ tax returns.
Disclaimer: These are general guidelines, not specific guidance or advice. Your business and personal situation may require different or additional filings. Please consult your tax advisor or Emerald Financial about your specific needs.