March Madness is upon us… and so is the madness of tax season. If you’re a small business owner, and especially if you’re new to entrepreneurship, this time of year can be overwhelming. At 3 Steps to Startup, we want to provide you with the know-how to make it through this tax season with a win! Here are some pointers for making sure you lead your business through March tax Madness without any upsets.
1) Know how much time is on the clock:
One of the most important things to know as a small business owner is the timing of your filing deadline. Most small businesses will need to file federal income taxes by April 18th, 2022 for the 2021 year. Exceptions include partnerships and S corporations, which must file by March 15th. These deadlines apply to businesses operating on a calendar-year basis. If your business operates on a fiscal-year basis, the deadlines will depend on when that fiscal year runs. Be sure you know the deadline for your business, and prepare to file your taxes before the deadline. And finally, arrange for help if you need it to beat the buzzer!
2) What about overtime?:
If you need an extension on your tax filings, you can get an automatic six-month extension, no questions asked, if you file the correct form. Sole proprietors can file an extension with form 4868, and C corps, S corps, and partnerships can file with form 7004. Importantly, if you file an extension, you still need to estimate and pay any taxes due to avoid paying interest on the debt.
2) Recruit the best players:
Just like a star player, a star accountant can be a game-changer! Make sure that your hire a good accountant with experience filing for small businesses. Beyond tax season, a great accountant for a small business should be providing insight into all financial areas of your business. If you are in the market for a dependable accountant, you may be able to identify a good one during tax season. Use network contacts and mentors to seek one out if you’re not happy with your current situation.
3) Don’t leave anyone (pr any documents) on the bench:
As a business owner, you want your business to have every advantage – every tax deduction – at your disposal. Do not leave any opportunity “on the bench” at tax time. Knowing what deductions are available makes all the difference. There are dozens of deductions that your small business might be eligible for. Some include:
- Utilities
- Auto expenses
- Employee salaries, benefits, and payment to contractors
- Advertising and marketing
- Travel
- Office supplies and furniture
- Office space
- Insurance
- And more!
To claim any deductions, you need to keep track of them! Gather all the documentation for these expenses throughout the year as part of your tax prep. You may be using software or just keeping track of receipts, but either way, a great accountant is an incredible asset for maximizing the deductions that add up over the year.
4) Be prepared for a full-court press – auditing:
Documentation is vital! You must keep proper records because small businesses are not immune from auditing. The IRS audits about 1% of taxpayers, but small businesses owners get audited at a higher rate: 2.5% of the time. Certain factors make a small business more likely to get audited, including:
- Mistakes on the tax form
- Making more than $1M annually (audited around 8.5% of the time)
- High deductions
- Consistent losses reported for business, including real estate loss
Be prepared with documentation if you expect to be audited, and be prepared if you do not expect to be audited. An IRS audit is nothing to take lightly.
5) Use the right playbook:
Tax forms can be tricky. `Which form you file depends on the type of business you are. A great accountant is an asset, but if you find yourself navigating your own taxes, do your research. Decide how you’ll file: will you file by mail? Electronically? Which forms do you need?
If you’re forming a business right now, and especially if you’ll have employees, you’ll need to make even more filing decisions. Make sure you’re getting the best advice for your particular situation, and turn to a well-regarded professional for that advice.
6) Trust your coach:
3 Steps to Startup helps West Virginia small businesses succeed! We want to make sure Mountaineer entrepreneurs have the tools they need this tax season to score big. Our network of seasoned entrepreneurs lends the expertise you need to understand your tax obligations as a small business owner.
If you need some guidance this tax season, don’t be afraid to seek reinforcements. 3 Steps to Startup is here to help small businesses overcome all the challenges entrepreneurship brings, including tax challenges. Don’t let the clock hit zero before you contact us for help with navigating your March Madness. When we work as a team, West Virginia wins!
Tags: 2022 Startups, 2022 Tax Season, 3 Steps To Startup, Business Start Up, Business Taxes, Businesses, Client Base, Information Resources, Informational Blog, Taxes