Paying federal income taxes is a major responsibility for all small business owners. Collecting the business records is easy to do, but filling in the forms correctly takes some time and effort to understand. Decide if it’s more reasonable to handle your business tax preparation yourself or whether it’s ideal to hire a CPA or professional tax preparer.
Select the Correct IRS Tax Form
Choose the correct tax form based on your type of business operation. Most small business owners need sole proprietorship forms like Schedule C (Form 1040) to report their business earnings and expenses. There are separate forms for businesses that run as corporations, limited liability companies (LLCs) or partnerships, including Form 1120.
Organizing Financial Records
Record keeping is a necessary part of any business tax preparation. From a small business accountant or secretary, collect all records that show your business income, savings and expenses, including bills, receipts, sales, bank statements, etc. This information is either printed on paper or stored in computer files. Go as far back as one year, remembering every financial transaction that occurred last year.
Keep Track of Filing Deadlines
Keep track of the filing deadline, which is typically April 15 and the same every year. Many tax filers are able to request six-month extensions, but you’ll still risk paying penalties and interest.
Tax Software Is Available
Web-based tax software fills in all of your data into the correct slots on the tax forms. All you have to do is answer a series of questions that are multiple choice or fill in the blank. Then, the forms are submitted directly to the IRS. Most software programs charge fees or provide free trials, but a few options are free.
Many tax software programs have integration features that allow the automatic transfer of data from the accounting programs. Every task is handled automatically and quickly without the help of a small business accountant. In the end, you’ll spend as little time preparing your taxes as possible.
How A Tax Preparer Will Help
Hire a CPA if you need a detailed explanation of the business taxes, incomes and expenses. You may need descriptions of there are more taxes to pay this year compared to last year or why you’re not qualified for a refund. An expert also helps your business to qualify for receiving incentives.
Also, hire a tax professional to prepare for a planned IRS audit. A tax expert helps you to collect the business’s records and review the data for errors. He or she helps you to prepare for interview questions that may come up during the audit interview.
Filing business tax forms is more complicated than filing personal tax forms. The correct information must be reported on the correct tax return forms. If there are too many errors, or the filing deadlines are missed, there are penalties that follow. For the best interest of your company, it’s recommended that you hire tax professionals to assist in the process.