Tax season can be a stressful time for business owners and you're probably wondering "when can I file 2020 taxes?". With more documents to worry about, deductions to track and payments to finalize, it’s easy to feel like you’re missing something. Don't wait for the last day for filing taxes and let a costly slip up happen this year instead, prepare for your business taxes now.
List All Your Deductions and Write-Offs
As a business owner, you can deduct many of the purchases you made throughout the year. This reduces your total taxable income, which ideally increases your return and lowers your total amount owed. To make the most of this, however, you need to have your deductions (purchases and payments from the year) itemized and categorized ahead of time so you don’t miss anything.
As you put your list together, make note of all purchases that fall within the following categories, according to Bench.co:
- Advertising and promotion
- Business meals
- Business insurance
- Business interest and bank fees
- Business use of your car
- Home office
- Legal and professional fees
- Moving expenses
- Rent expense
- Salaries and benefits
- Telephone and internet expenses
- Travel expenses
Get a complete overview of every deduction and rules for each one in this extensive guide from the Department of the Treasury.
Get Payroll Figured Out
If you have employees, there’s another important layer to your business taxes: payroll. When working with a bookkeeper or financial professional, this may be as easy as submitting the right paperwork and accounting for the costs in your taxes. When doing taxes yourself, however, you can easily make a mistake. Robert Leonard, Attorney at Law and CPA, explains:
“The Internal Revenue Code is notoriously complex, particularly for rules governing business taxes. It is easy for business owners to run afoul of the IRS when trying to calculate and pay its payroll taxes.”
The thing is, if you don’t have any assets to cover those payroll taxes, or any incurred payroll debt, the IRS can hold you liable with the Trust Fund Recovery Penalty (TFRP) or impose civil penalties. What’s more, “the IRS may get especially aggressive in its collection efforts of payroll taxes,” says Leonard.
Avoid any potential issues with the IRS by collecting the correct forms and data ahead of time, making sure you know what you need before it’s too late. Head to IRS.gov to get all the information you need to submit correctly.
Pay Your Last Quarterly Payment
The last quarterly payment of 2019 is actually on January 15—so don’t miss that one in the midst of the holiday season or your first of the year tax preparations. Write that check and send it out now so you have one less thing to worry about later.
Gather All Your Documents
Whether you’re doing taxes yourself, or with the help of a CPA, now is the time to gather all of your paperwork for the year. Asking yourself when is the last day to file taxes, and wait for that day to come to take action, migt no be the best strategy. Scrambling to get all of this documentation together at the last minute means you’re more likely to miss something, which will inevitably affect your return. Use this list from Fundera to make sure you have everything together in one place:
- Last year’s business tax return
- Payroll documents
- Bank and credit card statements
- Accounting documents
- Partnership agreements
- Depreciation schedules
In the event of an audit, you’ll also need a handful of other documents. To make your life easier, use this time to gather the following documents as well:
- Gross receipts
- Checking and savings account interest
- Returns and allowances
- Sales records
- Unclassified income
- Employee wages
- Insurance premiums
- Professional fees
- Contractor payments
- Office rent (or portion of the rent or mortgage paid on your home)
- Transportation and travel expenses
- Advertising costs
- Office supplies and equipment costs
- Phones and other communication devices purchases/costs
Plan Ahead for Payments
When you or your CPA finish your taxes, you’ll likely be responsible for a sizable amount of money. Now is the time to make sure you have that money set aside. To do so, use this SmartAsset calculator and then assess your finances. If you’re worried about being able to pay, work with your CPA to figure out an extension.
Start Prepping for Business Taxes Now
Now is the time to get prepared for your business taxes. Use these tips to get documents in order, the necessary money saved, and deductions organized. With all of this taken care of, you’ll feel less stressed going into tax season.
Jessica Thiefels is the founder and CEO of Jessica Thiefels Consulting, an organic content marketing agency for mid-sized B2B businesses outsourcing content marketing. She’s been writing for more than 10 years and has been featured in top publications like Forbes, Entrepreneur and Fast Company. She also regularly contributes to Virgin, Business Insider, Glassdoor, Score.org and more. Follow her on Twitter @JThiefels and connect on LinkedIn.