Taxes are tricky enough to handle solo when it's just you or your household you have to consider. When you're preparing taxes for a business, it's an entirely different proposition! Here, our team has put together a quick, simple guide for what sort of information, documentation, and prep work you'll need to gather during tax season.
Tax season has a funny way of making almost everyone feel like a disorganized mess. No matter how closely you've been keeping track of things throughout the year, tax time arrives, and there are suddenly so many little to-dos that it can be hard to know where to start, and it's easy to second-guess your efforts.
This is truer for small business owners than anyone since your tax responsibilities get substantially more complicated once you're running your own company. Fortunately, there are several things you can do to make this time significantly easier.
Get Your Employer Identification Number
One of the most important tools you'll need when preparing taxes for your business is your Employer Identification Number or EIN. This is basically your business's Social Security Number. It helps the IRS keep track of your business in their systems. If you don't have this info in your tax documentation, the IRS won't have any way to connect your information with your business. Having an EIN makes it much easier to file for state and federal taxes.
If you've filed taxes for your business in the past, you'll be able to find it on previous years' tax returns. If not, you may still need to get one. There are online services that can help obtain your EIN so you can reap the benefits.
Reporting Non-Employee Payments
One common mishap business owners make while filing taxes is forgetting to report non-employee payments. This includes everything from hiring freelancers or contractors to giving out prizes or rewards.
If you've paid any single person or business more than $600, you need to report that when you file taxes. This is why it's important to note any freelance work you use during the tax year. It's incredibly easy to hire someone early in the year, forget to make a note of it, and then wind up in trouble come tax time.
Be sure to keep an organized folder where you make a note of all your receipts for contracted workers and other non-employee payments so you can file these properly.
Making Next Year Simpler
If this year is a major struggle, you should consider taking steps to make next year easier. After all, if the month or two before taxes are due is the only time you're concerned about where things are kept or what you've kept track of, you're doing yourself a disservice. Tax prep should be a year-round experience. Here's how to do it:
Think about services that can help your business run more smoothly and make tax time simpler. For example, you can set an online payroll service to run automatically, so you don't have to input everyone's numbers, and it will calculate and file your payroll taxes. Companies like QuickBooks even offer a $25K guarantee that you won't be subject to tax penalties.
Keep several well-organized versions of your records. The simplest way to do this is to have a digital version of your records and a physical version. This way, if you lose one, you'll have the other as a backup.
When in doubt, save a document. When it comes to receipts and records, you can always opt-out of including something, and it's a far less stressful situation than needing something that isn't there.
Your small business tax reporting process can be a bit intimidating, but the best tools in your toolbox are organizational skills, a skilled accountant, and a calm head. Remember to focus on how you can make tax season easier for yourself all year long, and things will only get simpler in time!
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Note: None of the information provided in this article is designed to represent tax advice. We always recommend consulting with a professional when preparing for or completing your tax documents.