If you are the owner of a small business, you are probably aware that your deadline for filing taxes is just around the corner. Hopefully you’ve filed by now, but if not, C Corporations have until April 15th if your fiscal year matches the calendar year, and sole proprietorships, partnerships, and single-owner LLCs have until May 17th to file.
While filing your taxes can be complicated and time-consuming, you can make it easier for yourself by knowing what you should have prepared. Here are a couple of tips to keep in mind as you file or prepare for a visit to your tax preparer:
- Because of the impact the global COVID-19 pandemic had, this year’s tax season will look a little different. There is still some uncertainty for how different relief packages for small businesses will be taxed. For example, the Paycheck Protection Program created under the CARES act, which provided loans to small businesses to cover employee salaries, can have these loans forgiven.
- When filing taxes, including the expenses it took to arrive at your income is important. Be sure to have all of your expenses labelled in different categories. These categories include advertising, accounting, technology expenses, supplies, employee wages, utilities, etc. This means that keeping adequate records is a must.
- You’ll need these expenses to get your gross profit (income minus expenses). Keep in mind that gross income is different than net income!
- If you manufacture or buy or resell, the raw material or items you purchase for resale are deductible as cost of sales. You have to keep an inventory of your raw materials at the beginning of the year and at the end of the year.
- Depending on the type of business you run and the services you provide, do thorough research into deductions available to you. With the help of a proper accountant, they should be handling this already.
- If you have a tax preparer, make sure you have the proper person for the job. According to Chandra Bhansali, co-founder and CEO of Accountants World, they should work with you year-round, instead of only in the tax season.
These are only a few pieces of advice, and there are many factors that can affect how you file your taxes. The best place to seek advice is to ask your tax preparer or your accountant.
If you are looking for additional advice for this year’s tax season, Deb Gerber from the Idaho Small Business Development Center collaborated with ISU’s Continuing Education and Workforce Training to offer tax tips to individuals and small businesses. Check out the playlist below!