How to Prepare Your Business For Tax Season
As the year’s first quarter approaches, businesses should prepare for the upcoming tax season. During this time, you want to have a comprehensive plan in place to ensure the accuracy of the tax return and minimize any unexpected financial liabilities for your business. Early planning can help you achieve a more streamlined and stress-free process when filing your taxes. Here are a few tips to prepare your business for the upcoming tax season.
Know All the Deadlines
As a business owner, you need to be aware of the important dates related to tax filing. Keeping track of estimated quarterly payments, form due dates, and other deadlines is essential to ensure that you are meeting your tax obligations promptly and accurately. If you want to stay organized, you can maintain a calendar of all the necessary tax deadlines. During the quarter, you should regularly review and update it to ensure that you stay informed about any changes.
Remember, some dates will vary from year to year due to weekends and holidays. You should double-check the calendar each year to avoid missing any critical deadlines. Staying informed about important tax dates can help you take the necessary steps to ensure that your business complies with tax laws and regulations.
Get Those Books in Order
You want to ensure that all financial documents and books are ready for the tax season. Make sure that all business transactions are recorded in your general ledger. These transactions should be categorized accurately and consistently. When you have a consistent system, it can help you to avoid errors. Contact a professional accounting team or bookkeeper if you need help organizing your transactions.
It is essential to reconcile your books with your bank records to ensure a complete and accurate record. You always want to avoid any discrepancies in your books. Additionally, you will want to separate personal and business expenses. If you don’t do this immediately, it can create headaches during tax time. When expenses are mixed in one account, it takes more time to sort through them, and you might miss deductions. Consider opening a separate small business account as soon as possible to simplify the process.
Collect Your Statements and Records
If you want to prepare your business for tax season, you will need to have the proper documents for your tax preparer or accountant. There are three crucial financial statements that you will need for tax time: the income statement, balance sheet, and cash flow statement.
The income statement is a report that details your company’s revenue and expenses over a specific period, showing your net profit or loss. On the other hand, the balance sheet is a snapshot of your company’s financial standing at a particular moment, showing what your business owns and owes. Finally, the cash flow statement tracks the movement of cash in and out of your business, giving you an idea of the company’s overall financial health and liquidity.
If you don’t have these statements, you should contact a company specializing in small business accounting services to help you compile these documents. Even after tax time, these documents are a valuable tool to help you track your company’s financial health.
Stay Current With Payroll Obligations
Staying organized during tax season is crucial for small businesses to ensure an accurate return. One way to maintain order is by keeping a payroll checklist that covers all necessary information. You will want to verify employee information, report special procedures, and document additional compensation and benefits information. With a list, you can reduce the chance of missing important details during the tax preparation process.
Set Aside Money for Taxes
No one wants to pay taxes, but you must have the funds to cover your tax obligations. You should set aside sufficient funds to pay your taxes for the year. With that, you can avoid any potential penalties and interest that might result from underpayment. Many individuals and businesses will use a 30% rule. Setting aside 30% of your income ensures you have enough money to pay your federal taxes. Remember that this is a general estimate and may not reflect your tax situation. You should always consult with a tax professional or utilize tax estimating tools to get a more accurate assessment of your tax liability.
Hire an Accountant
Preparing and filing taxes can be overwhelming. You should seek professional support from an accountant. While they can assist you during tax season, these professionals provide invaluable services to businesses throughout the year. Many times, you will want to consult with an accountant before making decisions for your business.
Hiring an accountant can provide several benefits for your business, including tax savings, cost reduction, and an increase in profitability. Along with that, an experienced accountant can offer valuable insights and guidance to help you make informed decisions that can positively impact your bottom line. It may seem like another expense for your business, but hiring a South Jersey accountant can be a huge relief for you during tax season and the rest of the year.
We Can Help Get You Ready for Tax Season
Let us help you take care of your tax needs efficiently and effectively. TMD Accounting is the top choice for small and large businesses in Gloucester County. With over 40 years of experience in the industry, we can help you with your payroll, tax, and bookkeeping needs. If you want to schedule a consultation, call us at 1-856-228-2205.