Get ready for tax season.
It would be best if you prepared for tax season as a small business owner or startup. Tax season can be a busy and overwhelming time, but with proper planning and organization, it doesn’t have to be. Here are some tips to help you get ready for tax season. We will discuss what expenses are deductible for a small business owner, tax preparation checklist, tax planning, quarterly tax payments, and corporation taxes.
Gather all your essential documents, including your W-2, 1099 forms, and receipts.
To ensure the best tax experience possible, gathering all the essential documents for filing your taxes is important. Documents include 1099 forms – a form generated for individuals who have received wages from self-employment or any other non-employee income. 1099s provide accurate transaction details and always double-check for accuracy before making a financial move. It would be best to gather receipts for business expenses such as travel and equipment repairs. Collecting these documents can save you time, money, and frustration later when filing your taxes.
Read more What are 1099s? – Startup Tandem
Determine which tax bracket you fall into – this will affect how much you owe or get back.
Making sure you know which marginal tax bracket you fall into is essential when completing your taxes – it can mean the difference between owing money or getting a refund. Depending on your marginal tax rate, you may have taxes withheld from your wages, and high earners could also be subject to an additional form of income tax. Knowing which marginal tax rate applies to you will help you calculate how much tax to expect, so there are no surprises at the end of the year. Thus, determining which marginal tax bracket you fit in is vital for knowing your obligation when filing your taxes.
Read more about How the New TCJA affects Small Business Owners – Startup Tandem
Decide whether to file taxes yourself or hire a professional for tax season.
When tax season rolls around, many individuals and businesses must decide between filing taxes independently or enlisting the help of a tax advisor. It’s important to weigh the monetary value, time commitments, and risks associated with each tax filing method before deciding.
By considering your individual tax needs, you can confidently determine whether it’s more cost-effective and efficient to file taxes on your own or with an experienced tax professional. Whether it’s preparing tax documents, navigating new regulations and tax procedures, or exploring potential deductions and credits to reduce the amount owed – tax advisors offer the deep tax knowledge and expertise necessary for a successful tax season outcome.
Read more 4 Features of Tax Planning that Business Managers Should Know – Startup Tandem
If you’re doing it yourself, choose the right software or online platform to help with calculations.
When it comes to tax calculations, any mistake can be extremely costly. Many taxpayers choose to handle the tax filing process themselves, but it can be daunting if you need the right tools to help. The most important decision is tax software or an online tax platform. Tax software should provide resources to help you accurately and quickly enter your information, figure out your tax liabilities, and file your return easily.
Reimbursement software provides like-minded services but focuses on tracking employee expenses and calculating reimbursements due to employees based on company policy. To get the results you need while minimizing errors and wasted time, choose the right tax software or reimbursement platform for your business’s needs.
Learn About Form 1040, U.S. Individual Income Tax Return | Internal Revenue Service (irs.gov)
Stay organized throughout the process so that you can complete all critical deadlines this tax season.
Staying organized throughout tax season can save you from costly tax-filing mistakes and help you benefit from tax deductions or credits. Compile a tax checklist with tax items such as income documents for the year, tax-deductible contributions, charitable donations, and other applicable tax items. This checklist will make it easier to stay on top of essential tax deadlines without feeling overwhelmed. Knowing the filing deadline – April 15th for the tax year 2020 – is necessary to ensure you submit your taxes on time and avoid penalties or fees for a late submission. Create filing reminders at regular intervals and update them periodically so that you can take advantage of last-minute details when filing your taxes.
Consider standard deductions, such as charitable donations, that can lower your taxable income.
Tax season is often a stressful time of year, but there are several deductions you can take advantage of to help lower your taxable income. For medical expenses, any costs above 7.5% of your adjusted gross income could qualify for deductions, as can certain work-related deductions such as job hunting and transporting materials.
Childcare-related expenses and the earned income deduction can also lower your taxes. If you are a student, you may deduct school expenses such as books, tuition, and other fees. Knowing the many potential deductions will help ensure you’re paying only what you need to come on Tax Day.
Read more The Three Problems of Tax Planning – Startup Tandem
Expenses that are deductible for small businesses for this tax season.
Tax-deductible business expenses can provide invaluable tax savings for small businesses. These tax deductions include legitimate purchases made to support and operate a business, such as materials, supplies, advertising, utilities, travel expenses, insurance premiums, and more. It is essential to keep track of tax-deductible business expenses to maximize tax savings. By understanding which expenses are tax deductible, small businesses can identify potential tax incentives and tax breaks that will help them save money on their taxes each year. As a result of the tax savings generated by deducting classic business expenses such as rent and wages, small businesses can take advantage of better cash flow and profitability.
Tax planning strategies for the year
Tax planning is an effective way to minimize tax liabilities and maximize tax savings. This year, businesses should pay attention to tax credits, tax deductions, and trusts to help optimize their tax savings. Employers must be mindful of the tax laws that affect their employees, such as tax deductions for childcare expenses, individual tax credits for health care costs, and changes in the 401(k) retirement plan limits.
Additionally, business owners may consider registering business-related life insurance plans or setting up a trust fund to manage estate assets. Planning can ensure business owners take advantage of all the tax options this upcoming year.
Corporation taxes
S-corporation taxes are an essential element of the US tax code that must be understood by those setting up a business entity. S-corporations are specialized types of pass-through business entities that differ from traditional corporations in terms of taxation structure.
S-corporations avoid double taxation, where a conventional corporation will face tax on the corporate and individual levels on any profits generated. S-corporations suffer from fewer regulations and other benefits, making them attractive to many entrepreneurial businesses. Therefore, having accurate knowledge about S-corporation taxes is essential for any business looking to maximize its potential profit.
Now that you know some of the basics of filing your taxes, you can start gathering all the necessary documents. Remember which tax bracket you fall into, as this will affect how much money you owe or get back from the government. It’s also important to decide whether you want to file taxes or hire a professional. If you’re going the DIY route, choose the right software or online platform to help with calculations. Stay organized throughout the process and complete all critical deadlines.
Additionally, remember standard deductions that can lower your taxable income – such as donations – and expenses that are deductible for small businesses. Finally, implement tax planning strategies for next year to prepare you in advance. Filing taxes isn’t stressful if you follow these simple tips! Reach out if there’s anything we can help clarify or discuss further.
How Startup Tandem Tax help?
Our team is comprised of experienced and educated professionals that can help you create a plan to help you minimize your tax liability through the year. Contact us here to learn more about how we can help you!