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Running a business is no easy feat. And that’s without adding the complexities that come with tax season every year.
While most business owners prefer to do their own accounting, professionals say that working with an accountant year-round can save your business a lot of money. Taxes have to be paid regardless, and it falls to business owners to figure out the right sums to send to the IRS.
Here are some factors that should make your experience with the 2020 tax season go more smoothly.
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1. Have the Right Accountants
An accountant is crucial for any small business to thrive, and not only during tax season.
When a company uses the right accountant, they tend to be more financially aware of their business. Moreover, when you work with an accountant from the beginning, keeping your books in order becomes easy. They monitor your income and expenses, and when it’s tax season, they can file.
With a professional at your side, you get your numbers right, file returns on time, and also get bigger refunds without any issues. (if your business is based in the UK, check out these London accountants).
2. Every Record Matters—Especially During Tax Season
Most business owners aren’t overly keen on keeping records. They often procrastinate, and when they do keep records, they concentrate on the more significant purchases and ignore the smaller ones.
However, all documents are important, especially when tax season rolls around and it’s time to file returns. A business owner should organize all their receipts so that reviewing the records and working on the books can be more manageable.
3. Be Honest with Deductions
Most businesses will get deductions in one form or another. These deductions often make up the bulk of the refunds the IRS sends.
As a business owner, you always need to be honest about the deductions you have. When businesses overstate their deductions during tax season, the IRS ends up auditing the business. This leads to more paperwork and complications.
4. File Returns on Time
You must file your returns on time. When you don’t submit returns on time, you have to ask for an extension. This means more paperwork for you.
Filing on time means you will get your refund on time. You can avoid the late fees and interest and also avoid problems when you want to get a loan.
While some people file extensions because they haven’t done their calculations correctly, there are tools such as https://www.taxfyle.com/tax-return-calculator that can help you simplify the entire tax season process.
5. Separate Business and Personal Expenses to Simplify Tax Season
Sometimes business owners end up spending the business’s funds on personal items. While it might be inevitable sometimes, it’s highly frowned upon by the IRS.
Whether or not you reported the expenses of the business correctly, the IRS might end up auditing your company and personal accounts because of commingled money. The best option here is to open a separate account for the business and a corresponding credit card for handling only your business expenses.
6. Keep Accurate Payroll Records
Figuring out your payroll is crucial for the tax season. When you’ve got employees, ensure that your payroll records are up to date and as accurate as possible.
If you discover a mistake, correct it as quickly as possible. When a business is payroll-tax compliant, it tends to be more profitable, since the owner doesn’t have to deal with accrued penalties and fines.