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Preparing for Small Business Tax Season

Preparing for Small Business Tax Season

Preparing for Small Business Tax Season

Employee Emeritus Employee Emeritus ‎01-31-2012 12:27 PM

TAX.jpgThe following is a guest blog from Anita Campbell, the founder of the Small Business Trends website and CEO of BizSugar, an online community for small business owners.

 

 

The mere thought of taxes is enough to take the happy out of the new year. They're not fun, and no one enjoys having to deal with them. But for small businesses that want to stay in business, there's no other option. You can, however, make it a lot easier on yourself by being prepared not just to file your (check out www.bizsugar.com/Taxes), but to respond to an audit, just in case you draw the short straw. Here's how:

Gather All Receipts
To really be prepared for tax season, you should have been keeping all your receipts, invoices, and any other financial paperwork you'd need. Ideally, you'll have them in
organized, labeled files, and not thrown haphazardly into a shoebox. As much as you wouldn't want to go through that mess, it's not really fair to torture your accountant that way either. Not to mention, if you're paying him by the hour, you're going to pay more for the time it takes to straighten out your poor record-keeping.

Even if you've been vigilant about staying organized, you may still find you're missing a receipt or two. Don't wait until the last minute to file because now is the time to contact anyone from whom you need a copy of an invoice or receipt so you're ready when it comes time to file.Anita Campbell.jpg

Be Aware of Important Dates
Everyone knows personal income tax is due on April 15. Well, usually. This year, April 15 falls on a Sunday, and while that would normally make Monday, April 16 tax day, that date is Emancipation Day, an official public holiday in Washington, D.C., so personal income tax is due April 17, 2012. But as a small business owner, you have some deadlines to meet before then.

If you work with any contractors, you must have their Forms 1099 to them by January 31 (TODAY!), and to the IRS by February 28, unless you file electronically, and then it's April 2. It would normally be March 31, but that date falls on a Saturday this year. And don't let 2012 throw you another curve ball because it's a Leap Year. The forms are still due on February 28 for paper filing. Confused yet? Always, always
double and triple check form due dates with the IRS to be sure you don't miss any deadlines and end up having to pay fees and penalties.


Be Ready for an Audit
Everyone thinks it won't happen to them, but one of these days, your number may come up, and you'll have the tax man knocking on your door. The best way to be ready for an audit is to stay organized. Keep all your old records going back at least six years. The IRS standard audit usually goes back three years unless they determine a "substantial understatement of income," in which case that time period is doubled. The Supreme Court is currently deciding whether this practice will be allowed to continue, but for now, it's best to be ready for anything.

Also be aware that if the IRS decides to audit your small business, they may—and probably will—include your personal taxes. Don't think that because you have an accountant managing your business taxes, you can be lazy or sloppy with your personal records.
As a small business owner, your personal income is inextricably tied to your business income. Keep impeccable records for both.

One last bit of advice—hire an accountant. You may have a knack for accounting. Heck, you may even like it. But unless you're running an accounting business—and even if you are—you need to focus on running your business, not trying to wear too many hats. Bring someone in whose job it is to keep you on track so that you can continue to focus on bringing in revenue and keeping your customers happy. Let your accountant worry about keeping the IRS happy, and you'll be much happier, too.

 

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Contact the editor: tumara.r.jordan@verizon.com