Tax season is looming. And if you're like many business owners, preparing to reckon with Uncle Sam can be trying. Whatever you can do to streamline tax preparation is bound to make filing business taxes run more smoothly.
"For business owners, tax season can be the single most stressful time of the year," says Ian Crosby, CEO of Bench Accounting, a bookkeeping service for businesses. "The season can be less stressful, if you streamline filing business taxes by getting organized ahead of time."
Benefits to Streamlining Business Tax Preparation
If you streamline filing business taxes, there are several benefits, according to John Riggs, CEO of Ignite Spot, an outsourced accounting firm that provides tax and accounting services.
"Streamlining your business taxes means you're organized, and when you're organized you don't miss out on valuable deductions," says Riggs. "Streamlining your process also allows you to provide your tax professional with your business records earlier in the tax season."
The earlier you get your information to your tax professional, the easier it will make the process of filing business taxes, advises Riggs.
"Early in the season, accountants have more time to focus on your taxes and research potential deductions," he says. "As the clock ticks closer to March 15—deadline for partnerships and S-corporations on a calendar year—and April 15, accountants tend to get overworked."
5 Steps to Streamline Filing Business Taxes
There are quite a few tips that can help make tax preparation run as smoothly as possible this tax season. The following tips to streamline business tax preparation apply whether you're preparing your business taxes on your own or with an accountant.
1. Organize your bookkeeping.
"You can't file your taxes if you haven't done your bookkeeping," says Crosby. "Ensure that all of your transactions are recorded properly by reconciling your accounts, which is an accounting term for making sure your books match your bank records."
Riggs suggests reconciling your bank and credit card accounts monthly.
"This will ensure that you know exactly where your business stands throughout the year. That makes it easier and faster at tax time to turn your books over to your tax professional," he says.
2. Set up separate business bank and credit card accounts.
Separating business and personal accounts can help with streamlining filing business taxes, according to Charles Corsello, president and co-founder of TaxDebtHelp.com. (Corsello's company helps its clients resolve business tax problems.)
"Separate accounts make it easier to prepare business tax returns by helping you determine profit or loss and write-offs," he says.
The more your tax professional knows, the better he or she will be able to tailor specialized tax knowledge to your business.
—John Riggs, CEO, Ignite Spot
Keeping separate bank and credit card accounts also helps keep things straight, according to Riggs.
"Separate accounts ensure that you capture all items related to the business in one spot," he says.
3. Track expenses.
Companies that effectively streamline the process of filing business taxes online and in-person tend to track receipts on the cloud.
"There's no excuse to bring your tax professional a box of coffee-stained paper receipts," says Crosby. "There are apps that help you track your expenses year-round and store them in case of an audit."
4. Classify expenses.
"Categorize various expenses into separate categories," says Riggs. "You don't need a lot of accounts. Most businesses can get by with 20-25 categories."
Bookkeeping software exists that greatly helps with tracking and classifying, according to Corsello.
"Some software enables you to import business transactions from your bank account and credit cards, which makes things very easy," he says.
5. Use a tax organizer.
"Many tax professionals will send their clients a tax organizer. This helps streamline filing business taxes and ensures no write-offs are missed," says Corsello.
"A tax organizer asks questions relevant to the tax preparation process," he explains. "You can find organizers online if you plan on filing business taxes online yourself and want to get organized."
Should You Hire an Accountant?
If you don't have a business accountant already, you might want to hire one this year to help with filing business taxes, suggests Patrick Daly, a partner at Citrin Cooperman, an accounting and advisory company.
"There have been a lot of very complicated changes in the tax law," says Daly. "In fact, tax professionals are currently waiting for additional guidance from the IRS, as there continues to be many unanswered questions."
Ron Wainwright, a partner at the accounting firm Cherry Bekaert, agrees.
"Given the complexity of the Tax Cuts and Jobs Act (TCJA)," Wainwright says, "hiring a professional tax advisor who can help you make the most of emerging opportunities is more important than ever."
You might be able to figure how to go about filing business taxes online this year by yourself, but there are too many items that carry over from year to year, adds Riggs.
"A good accountant will track factors that affect your business over the long-term," he says.
When you work with an accountant, Riggs advises sharing as much information as possible.
"Explain how your company operates," he says. "For instance, relate if you made large purchases last year and the benefits you offered employees. Also mention future growth plans. The more your tax professional knows, the better he or she will be able to tailor specialized tax knowledge to your business."
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