If you are the owner of a start-up company, there are a million things you need to monitor and supervise. One of the most important things that will help your business work fluidly is timely tax filing. There are different options for filing your taxes: either do it on your own or hire a professional to help you. If you are trying to file your taxes without any error or complication, an essential tip for tax preparation for start-ups is to be organized. Gathering all of your paper receipts, cancelled checks, monthly statements and other miscellaneous bits can be frustrating and time-consuming as well. If you have not filed your taxes yet, time is not your friend. There is a chance you will end up making errors.
The tax deadline is approaching soon; the anxiety of Americans is going off the charts. The deadline has a great significance for the American economy, and it is the last date for filing your tax return. Most people have filed their taxes by now, but there are certain procrastinators who keep delaying the job on-hand. If you are one of those and need tips on tax preparation for entrepreneurs, then make sure to read this blog and avoid making any further mistakes.
Tax preparation for an entrepreneur is a tedious task. Be aware of all the documents required to be collected and all of the information to be grasped. Also, the procedure for tax filing is subject to tax law; if there are any alterations to the law, then it will directly impact your filing procedure. Be diligent and research the tax law, even though it is a tedious and time-consuming job. Simultaneously, it’s not difficult to get caught up. And, if you don’t want to get caught in the middle – hire a professional tax preparer instead!
- Gather relevant income and expenses information
Tax preparation for start-ups is mainly concerned with collecting and organizing your data. It will be easier if you segregate the needed information into four categories: 1. personal data, 2. nonbusiness deductions, 3. income documents and 4. business information. Each section focuses on different aspects of the tax return’s information requirements. They are explained as follows:
- Personal information includes your legal name and that of your spouse and dependents (if you have any), along with your date of birth, bank account information and Social Security Number.
- Nonbusiness Deductions, among others, include two forms – Form 5498 and Form 1098. The first reports on your Health Savings Account, and the second on your home mortgage and related interest paid. Keep track of your outflow of money. This includes documentation from ledgers, cancelled checks, bank statements and credit card statements. There is a lot of documentation involved, so it is advisable to have it all in print or, better yet, in electronic record.
- Income documents: if you are an entrepreneur, then refer to your Form(s) 1099 and if you are an employee, refer to your W-2 form(s). Also, your investment Form(s) 1099 will take into account your security transactions and investment gains.
- For start-ups and small-scale businesses, Schedule C of Form 1040 is to be referred for your business income and expenses information.
- Refer to prior year tax filings
Just as students refer to previous examination papers for guidance, you can refer to your previous tax filing papers. A tax preparation tip for start-ups is to make sure you keep scanned copies of your tax documents every year, for future reference. It is possible that most of the prior year forms and procedures will match that of the current year’s tax filing. Although there may be minor changes, the previous year’s papers can serve as a benchmark to ensure there are no details missing. Also, they can help you avoid repeat mistakes that you might have committed in the past and already forgotten about, and can help you understand your finances better.
- Reach out to the IRS
The Internal Revenue Service is the agency that deals with the collection and management of taxes, and that ensures there is smooth enforcement of tax laws across the country. If you are having any confusion or concern regarding your tax filings, you can actually reach out to them! Tax preparation for entrepreneurs is slightly different than that of employees. Understand this with the help of either the IRS or, much better, professional tax preparers.
One thing is for sure: you can’t get rid of the task of filing your taxes just by delaying it. Filing your taxes is inevitable, so why not do it before the deadline, gaining extra time to do it thoroughly and properly in the process? All of the information required to file your tax return is now available online. Any refunds you receive after your filing can be invested to help you earn more money. If you think you might owe, then the best option is to hire a professional tax preparer to guide you with advice on tax preparation for entrepreneurs.
Tax liabilities may leave you with unpaid taxes, which would obviously be carried forward to the next tax year; at which time, it will be even more important for you to be diligent about handling your tax matters early. If you were not prepared for tax filing this year, then start planning for next year; it is never too early to prepare for tax preparation for startups. Make sure you are accounting for all of your receipts, cancelled checks, bank statements and other relevant information, as discussed in this blog. Also, there are different ways for you to pay your taxes early; you can alter the number of your withholding allowances if you are an employee, for example. This would enable your employer to either increase or decrease the amount of money deducted from your salary throughout the year. And, you can also request for an adaptable account to manage healthcare and childcare.
Questions you may have researched before finding this post:
- choosing a cpa certified accountant
- cost to hire a cpa
- freelance accounting consultant
- online accountants for independent contractors and freelancers
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