Preparing for small business taxes
There are 2 surefire things in life, death and taxes. This quote is definitely true for small business owners that are faced with paying taxes every quarter and dealing with all of the small details that are required by the IRS and their accountant. To help you out with small business taxes, here is a simple guide to follow:
Let's start with one of the basic aspects of a small business, your payroll. Depending upon the type of small business you run, you may not need to pay state taxes, but you always need to pay Federal taxes. Always keep good financial records of your payroll taxes because you can be audited for them. If you prefer to do things via pen and pencil instead of electronically, your chances of being audited will only go up. You can download a nice payroll program for free online or you can purchase one that comes with financial software like QuickBooks. Keeping good payroll records is one of the best decisions you can make as you will need to compare your numbers each quarter to make sure you are paying the right amount in quarterly taxes.
W-2's or 1099's
You will be responsible for preparing W-2 or 1099 statements to hand out to your employees so they can file their taxes properly. Using a tax software program like TurboTax, you can easily kick out your employee tax information in just a few minutes. A lot of payroll companies will prepare W-2 and 1099 statements for you so you don't even need to worry about them. If you have good payroll records, preparing your W-2's will be really easy as you just need to copy over some numbers.
Bank Statements and Financial records
No matter what type of business you own, you must keep excellent financial records. It is your responsibility to have good financial records that are easy to understand so you can hand them over to your accountant where they can quickly glance over them and get the information they need to prepare your taxes. Use a good financial program like QuickBooks to help you keep track of your financial records. Every accountant knows how to use QuickBooks and it will be easy for them to prepare your taxes in just a couple of hours if you have done a good job tracking everything.
As a small business owner, you are able to deduct a number of things. Talk to you accountant so you know what deductions you are eligible for and make sure you keep track of these deductions. Miles on your personal vehicle, business expenses, medical deductions, and cell phones are just a few of the deductions you can expect to include in your taxes and you may be missing them if you aren't working with a good accountant.
The financial statements you need to prepare
As tax season is coming close, you will need to pull up 11 different documents to hand over to your accountant so they can prepare your taxes or so you can prepare your own taxes. Here are the 11 documents to get ready for tax season:
1. W-2's and 1099's
2. Bank Statements for the entire year
3. Petty cash records
4. Credit card and finance charges
5. A list of your inventory and assets
6. Mileage records
7. Home business expenses
9. Quarterly taxes
10. Shareholders and partner information
11. End of year balance sheet, profit and loss statement, and trial balance
Preparing your own small business taxes can become confusing and complicated quickly so your best option is to hire a good accountant who can do everything for you. Just make sure this person has a good reputation and that you trust them with your money and you are on your way to easier taxes.