Many people find tax season to be a nerve-wracking experience. As tax season approaches, a mad scramble begins, including hunting for documents, filling out forms, and much nervousness. Per the IRS, if you miss the IRS tax return deadline, you’ll incur a penalty of 5% of the unpaid taxes each month until you file, up to a maximum of 25% of the unpaid taxes.
However, this does not have to be the case with you. You don’t need to be stressed so much when filing your business taxes. All it takes is to start your outsourced tax preparation well before the deadline. Follow this guide for a smoother tax filing experience that can make your life less stressful.
- Ensure Accurate Bookkeeping: At the outset, ensure all of your business transactions are correctly recorded. If you do not have your bookkeeping in order, you cannot file your taxes since you may not have updated your books correctly. To avoid this situation, make sure you record all your business transactions in your general ledger. Also, categorize each transaction as accurately and consistently as you can.
- Balance Your Books: Make sure that your books are balanced. You may be using double-entry accounting, which should be done automatically using a program like QuickBooks.
- Reconcile Your Bank Accounts: Next, you must reconcile your accounts. This means you must ensure that your books match your bank records. Your bookkeeping isn’t complete until you match your books with your bank records.
- Separate Personal and Business Expenses: Moving further, you must separate your personal and business expenses. If you do not separate your costs from your business expenses, this could become a massive headache around tax time. Sorting through mixed-up expenses in a single account usually takes longer and increases the risk of missing potential deductions.
- Consult a Professional: You may need to discuss with a professional if you are doing everything yourself. While this could save money, it’s wise to have an experienced CPA or tax professional review your books. These experts ensure your financial records are accurate and your business is well-prepared for tax season.
- Organize Your Deductions and Paperwork: Since a significant part of your tax season scramble is spent hunting for receipts as you need proof for all your deductions, it’s a good idea to go paperless and digitize your records. Some tools that can be helpful are Dropbox, Evernote, and Google Drive. You can also use a dedicated business scanner such as Fujitsu’s ScanSnap and Kodak Alaris, saving you many hours of work as they can process many documents simultaneously. Alternatively, use a dedicated receipt app such as Receipt Bank or Shoeboxed.
- Prepare for Taxes If you expect to owe at least $1,000 in taxes, the IRS usually requires estimated tax payments throughout the year. To make setting aside tax money more manageable, you may set aside 30% of your income if you’re unsure about your exact tax obligations. This works out to be easier if you choose a saving method from the following:
- Per-payment Method: save 30% of each payment into a business savings account
- Monthly Method: calculate your average monthly income and save 30% of that
- Yearly Method: use last year’s income to calculate quarterly savings of 30%.
- Keep your tax savings in a different account to avoid spending them. Also, automatic transfers should be considered to make it easier. Finally, be aware of state-specific taxes like sales, franchise, property, and excise taxes, and consult your CPA to ensure compliance. By following these steps, you can efficiently manage your tax obligations throughout the year and avoid surprises during tax season.
- Understand Tax Reform and Its Impact: The Tax Cuts and Jobs Act (TCJA), effective January 1, 2018, significantly changes how C corporations and pass-through entities pay taxes. C corporations now pay a flat 21% income tax rate, a significant tax break regardless of earnings. Pass-through entities get a 20% tax deduction on Qualified Business Income (QBI), though there are limitations for specialized service businesses and those with employees. Additionally, the TCJA eliminates deductions for client entertainment expenses and reduces deductions for office snacks, meals, and employee transit benefits. Create separate ledgers for client meals, client entertainment, and transportation fringe benefits to adjust your books for these changes.
How KMK Can Help You with Tax Preparation Efforts
Outsourcing your bookkeeping to KMK offers a dependable, cost-effective solution for managing your financial records. Our team of skilled professionals manages tasks like ledger maintenance, financial statement preparation, and bank account reconciliation, ensuring precision and timeliness in your financial records. Along with these preparation steps, leveraging outsourced tax services from KMK Associates can provide expert assistance tailored to your business needs, ensuring a smooth and compliant tax filing process.
Get Started Today: Contact us for a free consultation and make tax season stress-free!
Outsourced Tax Services and KMK Associates
KMK Associates collaborates closely with clients to prepare tax returns for a range of business entities and individuals, including C Corporations, S Corporations, Partnerships, LLCs, and Trusts. Our tailored tax preparation services are crafted to guide businesses and individuals through the complexities of the U.S. tax system. At KMK, we are dedicated to delivering comprehensive, personalized tax preparation solutions. Our virtual services ensure a streamlined and hassle-free experience, covering:
Concluding Thoughts
In conclusion, preparing your business for tax season doesn’t have to be overwhelming. You can streamline the process by following these essential steps—ensuring accurate bookkeeping, organizing deductions and paperwork, setting aside tax funds, understanding tax reforms, and potentially outsourcing to experts like KMK Associates—and minimizing stress. Starting early and staying organized will ensure compliance with tax regulations and pave the way for a smoother, more efficient tax filing experience. Preparing in advance is crucial for a successful tax season, allowing you to focus on growing your business.
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