The thing everyone dreads- Tax Season. Ugh. I don’t know about you but my stomach drops when I think about it even being a CPA. If this is your first business and first time filing taxes for a business, the process can be daunting and confusing, but there is no need to stress. I have put together a simple guide that will walk you through the most critical steps now so when tax season comes along, you are confident and prepared.
If you are like me – booked and busy – you might not have time to always think about your tax files and organize your bookkeeping; that is why today’s blog sponsor is a service that has personally helped me stay on track with all of my business expenses and tax information. Bench’s online bookkeeping platform pairs you and your business with intuitive software that takes care of most financial tasks that come with being an entrepreneur. From filing taxes to organizing your expenses, you can sign up for Bench and have it all taken care of. Bench is currently offering a deal for my Badass CEO listeners and readers – if you sign up using my referral link, you will get 30% off your first three months! Don’t miss out!
TIP 1: Get Organized
This is the first and most critical step to having a smooth tax season because the more organized you are and the more documents you have on hand, the fewer mistakes and overlooks you will make (resulting in some unpleasant IRS fines). Every business is different and needs different documents. Still, all will need your necessary information: your personal information, last year’s tax returns, and your Employer’s ID number you can find on the IRS website.
Your specific business’s documents will be needed after your basic info, which includes expenses and earnings. Make sure to have things like invoice copies, sales records, rent receipts, employee salaries, and mileage records. This can be overwhelming at first, so Bench has created a great set of small business tax checklists to help you know what you need.
TIP 2: It Is All About Accurate Bookkeeping
If you haven’t stayed on top of your bookkeeping, you aren’t ready to file your taxes. That may sound harsh, but it’s a fact of life. If your records aren’t up to date, you don’t have the information you need to file. You can still go back and do your bookkeeping retroactively, so long as you have complete records, including expenses and earnings – this is why the organization is the key to running your business admin smoothly. The most important step in bookkeeping is recording and categorizing your annual business transactions, whether that be accounting software or the old school method of an excel spreadsheet. Once you have it categorized, it is time to reconcile your books with your bank account to make sure every transaction matches with a recorded action. This step might seem trivial, but it will help you weed out any discrepancies.
If the prospect of retroactive bookkeeping scares you away, consider getting help from professional bookkeepers. Bench can bring you quickly up to date. And if you opt for BenchTax, they’ll get your taxes filed for you too.
TIP 3: Knowing What Your Business Structure Is Knowing How To File
Once you’ve got your bookkeeping and records sorted out and you know which taxes you need to pay, it’s time to start filling out forms. But to fill out those forms, you need to know what your business is classified under.
- Are you a sole proprietorship? Then you will be filing IRD 1040 that is due April 15, 2021
- Are you a multi-member LLC? Then you have to file a 1065 and a Schedule K-1 for each member by March 15, 2021
- If you are a C corporation, then you have 1120 form due April 15, 2021
Questions and forms like these are why I love using Bench to bookkeep and file my taxes; as soon as I input my information, they have my documents ready and prepared to fill out – no second-guessing if I have the right one or not.
TIP 4: Save Up
Over the year, you should be putting aside money to pay taxes on the profits you report. For sole proprietorships, partnerships, and S corporations earning over $1,000 for the year—you’ll have to pay quarterly estimated taxes. It may seem like a hassle at first, but give it a little time, and this process will soon become second nature. And if you need some extra time figuring out your documents and filing your taxes, always apply for an extension. With an extension, you can complete your taxes worry-free and save yourself some fines.
TIP 5: Claim Your Small Business Deductions
My last tip is also one of the best parts about working for yourself when filing your taxes because there are many more deductions you can claim. These can include start-up costs, raw materials, commercial rent, insurance, business travel even the smallest office supplies that keep your business operating. Just don’t forget to keep your receipts and keep your planned deductions organized and filed away throughout the year.
Do what I did and make your life easy for a low monthly charge and outsource your books and taxes to Bench.com.
Disclaimer: I receive fees for promoting Bench services.