Tax season is upon us, and while the process usually strikes fear in the hearts of many small business owners, freelancers and entrepreneurs, it doesn’t have to! We understand that filing your taxes can be time-consuming and frustrating, so we’ve got all the info you need to ensure that your tax season goes off without a hitch and keep you organized for the year ahead.

Be a Stickler for Details

If you’ve transitioned from a traditional 9-5 into entrepreneurship or small business ownership, you may feel a little overwhelmed by the bookkeeping involved. From receipts and expenditures to invoices and incoming payments, there is a lot of information to collect throughout the year, and all of it is important for your tax filing process. If you haven’t been a stickler for details up to this point, don’t panic. Do your best to account for all your expenses and income from this past year, but make sure you start recording that information for next year as it will simplify your tax filing.

Fortunately, you no longer have to keep your receipts in a shoebox, as technology makes it much easier to track all the important information you need. Use a program like Quickbooks to track your expenses and try Spera to track all your invoices and incoming payments and stay organized.

Know What You Can and Can’t Claim/Deduct

Much of the process of filing your small business taxes requires you to get educated about exactly what you are required to claim and deduct. This is where you’ll really benefit from keeping detailed records of your expenses.

So, what can you deduct? Here are a few of the most important small business deductions to keep in mind:

  • Business Property Rental
  • Vehicle Expenses
  • Salaries or Wages
  • Supplies
  • Utilities
  • Insurance
  • Advertising
  • Travel
  • Home Office

If you are unsure about whether something can be deducted, save the documents anyway and ask a tax professional.

Make Sure You’re Using the Right Form and Know Your Deadlines

All small businesses are required to report business earnings and pay taxes on them, but the way you file will depend on how your business is structured. For instance, if you are a sole proprietorship or the sole owner of an LLC, you can report your business income and expenses on a Schedule C, which can be attached to your personal income tax return. As most small businesses operate as sole proprietorships or individually owned LLCs, that’s likely all you need. But if you are operating on a larger scale, such as through a corporation or shared ownership LLC, you will need to file a separate corporate tax return with a Form 1120. To simplify the process, use a tax preparation service or hire a professional to help you sort through the paperwork and ensure that your documents are in order.

When filing a Schedule C, which is the most likely scenario for a small business or freelance entrepreneur, you will need to list your expenses and income and then deduct the total expenses from the total income. That number should then be reflected in your personal tax return as your taxable income. This type of filing does not have a separate filing deadline, and should be completed by April 15.

Get Help from a Professional 

There is a lot of information to organize and report when filing your small business taxes, and fortunately you don’t have to do it alone. If you are stumped by the questions on your tax form, enlist the help of a professional tax preparer. They will help you work through each deduction to ensure that you provide the most complete and accurate information so that you can rest easy, without the fear of an audit. In the unlikely event that you do receive an audit letter from the IRS, don’t panic! A professional will help you scour your records for inconsistencies to correct the mistake and settle the dispute with the IRS.

Having a better understanding of the requirements for your small business taxes will help you navigate the process with ease and prevent the dread you feel every year when tax season rolls around. Don’t stress – get informed, stay organized and don’t hesitate to ask for help if you encounter any issues.

To get started recording your income and organizing your task load, try Spera free for 30 days!

Cristiano

Author Cristiano

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