Since the onset of the pandemic, the Internal Revenue Service (IRS) has come up with multiple new tax rules and regulations. Many of them are COVID-related and might affect your business and its tax system. There have been some exemptions, some tax reliefs, and more. The system is fast-changing, but not keeping up with any of it is not an option, or it can lead to penalties and legal issues.
Businesses need to take notice of these changing tax guidelines and plan their filing system. Read the full blog to know some insider tips on how SMEs can improve their tax filing system this season.
Proper Tax Filing can be a Major Revenue Saver for SMEs
As a small and medium business owner, you need to understand multiple tax needs. There are federal, local, and state tax requirements for a business. If you are able to plan and file your taxes on time and do it well, you can save yourself money and hassle. There are the basic COVID reliefs, there are also Energy Tax incentives, and also federal tax deductions for charitable donations by small businesses. You need to understand if you are eligible for any of these and reap its benefits.
10 Tips to Better Your Tax Filing
Filing taxes are the most critical, tiring, yet inevitable job of a business owner. Here are some industry insider tips to make your tax filing season a little less stressful.
1. Hire an expert accountant
Hiring an expert accountant to get advice and do the work for you is the best way forward. Many people think they can simply figure out their own way around taxes without outside help. But there are many pitfalls in the fine-printed rules and regulations of the IRS, and your lack of expertise might land you in one of these. Since you are a small business, it would be cheaper for you to getoutsourced accounting services. That way, you do not need to hire and pay accountants full-time.
2. Don't miss out on any income filed to IRS
The IRS gets every copy of the 1099-MISC forms you receive so that they can keep track. Do make sure that the income you report to the IRS matches with the income reported from the 1099-MISC forms you received. Any discrepancy will lead to a background check on you with IRS.
3. Keep paper trails and records
Keeping track of your accounts, proper accounts reconciliation, and bank records is extremely important to filing tax returns. If you do not keep track of your expenses and payroll, you are setting up your business for an audit and bigger problems.
4. Track the difference between net and gross income
As a small business owner, the difference between net and gross income can make a humongous difference. The total money you make after deducting production costs is your gross income, but if you deduct regular expenses from it, that is your net income. You need to keep track of these while filing your taxes.
5. Classify your business
There are multiple categories of businesses, and all of them have different tax regulations. You need to register your company in the correct category like LLC, Sole Proprietor, Partnership, Corporation; there can be many options. You need expert advice from your legal attorney and accountant before you classify your business.
6. Ask your accountant for a budgeting and forecasting plan
A proper budgeting and forecasting plan can help a business map its future much better. You can understand how much you can put into employee pension funds, how much money you have in hand, how much bonus you can offer, etc. A good accountant is sure to help you with all of it and help you understand the scope of growth for your business in the immediate future.
7. Be aware of tax deadlines and penalties
Do not keep document accumulation and tax filing work for the last date. The IRS’s late tax filing and late payment penalties are huge and will drain you of funds. The basic penalty is 5% of the unpaid taxes, and it adds up every month, starting from the last tax due date. This percentage can go up to 25%, depending on how late you are in filing it.
8. Stop spending time on excel sheets
No matter what the size of your business, it is never enough to keep track of your business transactions on excel sheets. They can be jumbled up and extremely confusing. You need a proper ERP software integration for your business to automate your daily functioning and tracking of finances. These systems are auto-updated, and reporting and documentation are done with ease and will leave you enough time to focus on other important matters.
9. Separate business and personal accounts
When the IRS comes down for an audit of your business and gets any hint of your personal transactions and business transactions overlapping, they will charge you. Even if you filed your taxes correctly, mixing accounts and credit cards will raise a lot of red flags with the government and get you under their radar.
10. Manage payroll
The IRS checks up on business on a quarterly basis to ensure payroll taxes are all filed on time. But managing payroll is a very detailed task. Hiring an external firm to manage the payroll for you can be a great start to making the process seamless. It will release all payments on time and also help keep up with all the tax filing rules and keep a clean track record for your business.
Summing Up
Tax season is a nightmare for most SMEs because it takes up most of their time and engages their workforce in boring office work. But it is unavoidable; it is better to shift this work to expert back office accountants and solve the problem with ease.
The KriyaGo team is here to get the tax filing work done for you with the help of our experienced accountants at work. We also use the latest software to streamline your work and get the job done in no time. No more breaking sweat over filing taxes on time. Give us a call today to book our services.
