Filing taxes annually is the responsibility of the business owners, and they must have a system in place to ensure that they meet the deadline. All kinds of businesses must pay taxes, but the task is a bit easy for small business owners compared to big companies and corporations. However, it might seem confusing for small business owners, at least for the first few times as they go through a learning process and become accustomed to it after a few years, believes Brian C Jensen.
Depending on the capabilities and the time that business owners can devote to the tasks related to tax preparation, they can do it on their own or take help from some professional tax consultants who can do the job for them. However, the business owner must provide all documents and data to file the tax returns.
It means that the business owners must prepare to file the taxes by following the steps discussed here from starting the business.
Obtain an EIN, advises Brian C Jensen
The first thing that business owners must do is register the business identity with the Internal Revenue Service (IRS) by obtaining an Employer Identification Number (EIN). However, small businesses need not collect an EIN for tax filings.
Do good bookkeeping and accounting
Business owners must be cautious about maintaining records of all business transactions with financial implications, which means recording all sales and expenses accurately. Preserve the documents like invoices, sales receipts, deposit slips, canceled checks, and other documents that can help substantiate the company’s sales and expenses. It should help to claim appropriate deductions. Brian C Jensen advises employers to retain all tax records for the last 5 years and store them securely. These documents are invaluable to answer any queries that the IRS might raise later about the tax return.
Implementing proper bookkeeping and accounting system should help to record all income and expenses. The tax is simpler for small businesses that can follow the single entry system of bookkeeping, provided all transactions are in cash. It will form the basis of filing the taxes based on income and expenses.
Deduct taxes of employees
All company employees should complete and sign form W-4 that helps determine the amount. To withhold toward employment taxes right from the time they join the company. It is the employer’s responsibility to withhold the correct amount of taxes. From each paycheck and maintain a record for it. Create a separate bank account for placing tax withholdings. So that the money is readily available when it is due for paying the employment taxes. It will save you from paying the amount from your pocket, affecting the company’s profit.
Companies that are better at maintaining financial records and documents find it easier to prepare for filing taxes. Keeping records updated is most vital as it is to archive the documents systematically. So that it is easy to retrieve. Ensure that you have all records in place.