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It’s Almost Tax Time
Tax time has plenty of complications. Make it a little easier on yourself and save some time during tax season by following a few tips.
By DeAnna Stephens Baker
Date Posted: 3/1/2012
Tax season is right around the corner and if your company is not already preparing for it, it is time to start. As you dive into one of what many business managers consider the least enjoyable part of running a business, here are a few tips to keep in mind.
Considering the fact that it is now March, it is almost too late for this idea, but you can still try. Whether you are having an outside accountant do your taxes or are doing them in-house, don’t wait until the last minute. Schedule a day to work on them now, so that you have time to review everything for errors. Rushing through tax preparation is a good way to make mistakes. And if you’re doing them at the last minute, there will not be time to double check the paper work. Many people do wait until the last minute, making April a busy time for professional accountants. To ensure that you don’t pay for a rushed job, get all your information to your accountant as early as possible.
Do yourself and your accountant a big favor and don’t bring a truckload of mixed receipts and invoices and dump it out in a heap. Organization is key to an easier tax preparation process. This is something that should be done all year long, not just in April. Keep all supporting documents organized for easy access. This includes receipts, payroll information, bills, invoices, cancelled checks, proofs of payment, deposit slips, bank statements and credit card statements. Even something as simple as sorting all these documents by month can make finding what you need when you need it much easier for a small company.
This also reduces the work needed to prepare in the case of an audit. If your company is ever audited by the IRS, the burden of proof for any deductions or credits is on you. You need to be able to find the right documentation when you need it. The more detailed information you have the better, especially if you are expensing items. Receipts are especially important as they show what was purchased to support claims in an audit.
If you are not already, consider using a computer software program designed for businesses to maintain records. This aids organization and makes finding information much quicker. Computers can also help catch any simple mistakes in calculations.
Keep a Tax Calendar
Maintain a calendar of all filing deadlines year round. This should include both state and federal deadlines for your type of business. Deadlines for things such as semiweekly or monthly payroll taxes, Form 940 and 941 filings, and W-2 filings, all tailored to your company’s requirements should be on it.
The most important tax related date this month for many companies is March 15. It is the deadline for:
• Corporations to file Form 1120 for calendar year 2011, pay any tax due, or file for an extension.
• S Corporations to file Form 1120S for calendar year 2011, pay any tax due, furnish shareholders with copies of Schedule K-1, and file Form 2553 to elect S Corporation status beginning with calendar year 2012.
• Electing Large Partnerships to furnish Schedule K-1s to each partner.
Know Your Credits/Deductions
Know what credits and deductions your company is eligible for and be aware of any changes in the law since last year. One of the big business credits this year is the Small Business Health Care Tax Credit. To be eligible, a company must cover at least 50% of the cost of single health care coverage for each employee and have fewer than 25 full-time equivalent employees with average wages under $50,000 a year. For 2011, the maximum credit is 35% for small business employers. However, even if the business did not owe tax during the year, it can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit.
For a more complete list of deductions, read the article that the Pallet Enterprise ran in the November 2011 issue on the latest deduction opportunities.
Get Professional Advice
Even if someone inside the company is preparing the taxes, talk to a tax expert for advice on what deductions and credits your company is eligible for. Also, consider talking with an accountant for help on tax planning throughout the year. They can advise you on business decisions all year that could help your company get the maximum benefit from credits and deductions.
Use Available Resources
If you are not having an accountant take care of your company’s tax preparation, take advantage of free online resources to help guide you through the process. The IRS maintains a small business website (www.irs.gov/businesses/small), which includes tax tips, forms, explanations and eligibility requirements for credits, and other helpful tools. Likewise, the U.S. Small Business Administration has a wealth of information on its website (www.sba.gov) including explanations of how different business structures affect taxes, guidance tailored to small businesses on business expenses and tax deductions, and guides to managing a small company’s tax obligations.