Tax season preparation for businesses often begins in the first quarter of the year. There is paperwork to be organized with the purpose of producing an accurate return for your business.
April is approaching, and many day-to-day decisions have a big impact on your overall tax payments. By planning ahead of time, your company can keep on top of the paperwork that comes in fast and furious during the first few months of the tax year.
Whether you’re planning to file your income tax return or want to plan forward for the current year, here are five critical steps to start now to ensure you’re up-to-date on taxes and have accurate information.
5 Tips and Tricks for Tax Preparation
Follow these five tax-filing tips:
Decide who will prepare and file your taxes
If you experienced major business changes in 2021, your taxes will be more challenging. As a result, you may need to employ a CPA or another tax specialist to help you prepare and file your taxes.
Just don’t wait until the calendar turns to April to make that decision; it could cost you a lot.
Alternatively, you may find yourself trying to find someone who isn’t too busy to assist you.
Examine Previous Year’s Tax Returns
Most folks see only minor adjustments from one tax year to the next. Previous federal tax returns serve as excellent reminders of areas that are easy to ignore, such as interest or dividends, capital loss carry-forward balances, and rarely used tax deductions.
Can’t afford a tax professional? Look into alternatives.
If you’re not comfortable doing your own taxes and can’t afford to go to a CPA, there are free solutions.
The Free File Alliance is a group of tax software providers that work with the IRS to allow American taxpayers e-file their taxes. To be eligible for the service, your annual income cannot exceed $66,000.
The Volunteer Income Tax Assistance program (VITA) employs IRS-certified volunteers to provide free basic tax preparation and e-filing to those who earn less than $56,000 per year, are disabled, or have low English proficiency.
The IRS provides an online tool for locating hundreds of free tax preparation centers throughout the United States.
Furthermore, the AARP Foundation Tax-Aide program provides tax preparation assistance to persons 50 and older, as well as those who cannot afford a professional tax preparer.
Tax calculation and filing can be automated or outsourced.
While the IRS has worked to simplify tax forms and minimize the time and complexity of filing a tax return, it remains a challenging job, especially given that it occurs only once a year and is typically stressful.
The IRS provides free fillable forms for electronic filing for persons with incomes greater than $72,000. These forms, however, only provide basic guidance, so you must be familiar with tax preparation.
Most filing tools allow you to keep track of any owed refunds and choose your chosen payment method – direct deposit, paper check, or holding and applying the refund for the next tax year.
Consider your income, the complexity of your return, uncommon occurrences that significantly affect your income or expenses, when deciding whether to hire a tax specialist or use a software program for tax preparation.
Before filing your taxes this year, you should see a certified public accountant if you:
- Have a yearly gross income of more than $150,000
- Participate in sophisticated investments with tax advantages or involved in partnerships or private companies
- Have had a significant change in income or expenses in the preceding year
- During the tax year, you started or closed a full or part-time business
- Have doubts about performing your own tax calculations correctly and completely
If any of these apply to you, the cost of guidance from a certified public accountant will be worth it.
Collect Bank Statements
Your bank statements will be requested by tax preparers so that they can be compared to your balance sheet. Your tax preparer can ensure that all of your expenses and income are accounted for by comparing your bank statements to your balance sheet.
Final Thoughts: Tips for Tax Time From the Pros
Paying taxes is an unavoidable part of doing business. Plan ahead of time and do your homework. Gather all of your documents and meet with your accountant and tax preparer as early as you can. Tax season is stressful, but it doesn’t have to be a nightmare if you plan ahead of time.
Still have questions about tax obligations? For more information, schedule a call with one of Today CFO’s certified tax accountants free of charge!