How to Survive a Tax Season without Stress

When the taxation period comes, business owners need to take into account the key tax considerations. The end goal for every entrepreneur during the tax season should be going through that stage without inducing too much stress. In order to reduce the taxation-induced tension, it’s vital to be well-prepared for all the requests your local tax administration might have. Especially if you’re a business novice who still doesn’t know all the tricks of the trade. Since the USA have one of the most progressive tax systems in the world, we’ve decided to help future business owners by presenting some essential American tax rules.

Make a stash of bills and receipts

According to the IRS regulations, every business owner is obliged to keep a business receipt or a bill for six years from the date of the tax return. Also, the copies of these documents are acceptable, as well.

Therefore, it’s extremely important to make a stash of your bills and receipts, so that you can justify every single expense you make for your business.

Nowadays, you can connect your business bank account with a wide range of expense-tracking apps. That way, you won’t miss a single expense, since your software will record every single purchase you make for the business. What’s more, this tool will help you spend your money in a more responsible way.

Additionally, don’t forget about your travel and leisure expenses. For instance, if you go to a business conference in Palm Springs, make sure that you keep all the receipts, from your plane tickets to specified hotel expenses.

Nevertheless, it’s not necessary to send all those separate bills to the IRS. You should include them in your tax return as expenses and save them. That way you can prove your tax return in case the tax officers knock on your door.

Work with a tax preparer

When you’ve only set your foot onto the business ground, you might not be able to deal with all these regulations by yourself. This is why you’ll need to choose the right tax preparer for your business, to assist you in sorting out your tax duties.

First of all, this professional will tell you what tax form your business is eligible for. In a nutshell – LLCs owned by one person and sole proprietors should file Form 1040, with a Section C attached to it. On the other hand, LLCs owned by several people and business partnerships will file Form 1065. You’ll learn more details about these conditions from your tax preparer.

What’s extremely important when it comes to the tax preparer is to prepare all the documents in advance. Those professionals aren’t Salvation Army and their services will cost you a fair amount of money. To make your work with them efficient, deliver your balance sheet and income statement in advance, as well as your journal entries. That way, they’ll be able to go through your books before they get to your office. It will save both your time and assets.

Keep your business information updated

Apart from details about your profits, losses, and expenses, the tax authorities will need the accurate information about your business. In line with that, it’s vital that you provide your physical address, social security number, and your business name. So, make sure that you correctly write the registered brand name and don’t omit a letter or symbol.

When it comes to your personal name, you need to inform the Social Security Administration at once in case you’ve changed something. For instance, if you got married and changed your last name, those changes have to be registered by the SSA.

As opposed to that, if the name on your SSA file doesn’t match the name on your tax return, you might have inconveniences with the IRA. If nothing else, it will cost you some time. So, make all these changes on time, to avoid any additional problems.

Finally, if you use a different Employer Identification Number – EIN – for your enterprise, don’t forget to include that figure in your tax return, as well.

Track your assets sales/purchases

No matter what field you’re in, you’ll always have some expenses pertaining to your business assets. For instance, if your business requires an office computer, you might have to buy one. Also, you might need to buy some new equipment for your office, such an air-conditioner.

On the other hand, selling office items is another way to free some money to buy some new assets.

All these transactions need to be recorded and kept in your books, in order to try to make any deductions.

Bill Tracking for Tax

What’s necessary here is the price of the item in question. The date you started using it for your business and the date you sold it. Also, the money you made by selling it should be taken into account, as well.

All these elements will be used to calculate whether your business has gained or lost money via that purchase/sale. That way, the IRS will decide whether it’s deductible or not.

Insist on timely payments

One of the major tax considerations is late taxation. What new business owners need to know from the very beginning is that filing a tax return after the deadline is an expensive option. Not only that you’ll face a penalty, but you’ll also get a special mark in your IRS file. Consequently, all your tax returns in the time ahead might be under greater supervision. What’s more, your business could get more attention than you’d like.

What could lead you to break the taxation deadline are untimely payments. In this part of your business, it’s essential that you set some strict rules and hold on to them. In line with that, you could tolerate late payments only to a handful of reliable, long-term clients. Even then, make sure to send out regular reminders.

For all other clients, speak your mind at the beginning of your collaboration and inform them about your zero tolerance policy on late payments. As you set the firm invoice payment terms, it will be much easier for your business to handle the payments. Hence, you’ll be able to fill out and file your tax return on time and avoid any problems with the IRS.

Conclusion

When you’re dealing with your tax considerations, make sure that you always keep educating yourself. The more you learn with every new tax return, the less stressed you’ll be for the next one. You’ll do a great job, if you keep all your business papers and records in order. Still, always track all your expenses and don’t tolerate late payments. Following all these steps will take you through the tax season in a smooth and efficient way without stress.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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