Set Yourself Up for Success This Tax Season
There are not many things that strike as much fear into a business owner as the word “taxes.” A necessary evil of owning your business is the filing requirements that have people scrambling. Getting started is half the battle, yet being prepared can not only save you anxiety but save you money as well.
Tax day not only signifies the day to pay remaining taxes owed for the prior year, but also a slew of other due dates that you want to be aware of. For more information about taxes in 2022, you can visit the businesses section on the IRS website. There you’ll find resources and the necessary deliverables for a successful tax season.
Step 1: Gather Your Tax Documents
All those receipts that you have been diligently saving this past year will finally be put to use. While we highly advise tracking your business and personal taxes separately, there usually is some overlap. Starting in January, you would also be receiving tax documents in the mail that are helpful to store in one place. Having these documents gathered will help to avoid costly tax mistakes and make sure you are getting all deductions you are entitled to. A good place to start is using your prior-year tax return as a guide as to what you need to collect such as:
- W2’s, 1099’s, and other income forms
- K1’s for any investment/business forms
- Charitable donation letters and records of non-cash donations
- Mortgage statements and property taxes paid
- HUD documents if you bought/sold a home during the year
- Other deductions including health insurance, childcare, medical expenses
Are You a Small Business?
If you run a small business, there might be differences in the forms and instructions you’ll have to follow this tax season. Sole proprietorships should use a Schedule C form (Form 1040). If you’re a corporation, on the other hand, you should use Form 1120, which is the U.S. Corporation Income Tax Return. For additional information on taxes for individuals who are self-employed or small businesses with assets under $10 million, you can visit the IRS Small Business and Self-Employed Tax Center.
Step 2: Know What Corporate Tax Options Are Available
There are still some things in early 2022 you can do that will offset 2021 taxes. Knowing these items and what your effective tax rate is could be a beneficial win for you. April 15 signifies more than just tax day, but is also the deadline for contributing to an IRA or an HSA. The 2021 maximums for these two items are:
- $6,000 to an IRA, plus $1,000 catch up contribution if 50 years or older
- $3,600/$7,200 for single/family, plus $1,000 catch up contribution if 55 years or older
Another option as a business owner is to fund a 401(k) or SEP account. These would be due by March 15th for business returns unless the return is extended. This would then allow until September 15th to fund a retirement plan.
Step 3: Understand Tax Extensions and How They Work
One of the biggest misconceptions about extensions is that it raises red flags with the IRS. Extensions are filed for a variety of reasons such as funding retirement plans, waiting on K1’s, or needing more time to collect information. What you do need to know about extending your tax return is it does NOT extend the time to pay.
Step 4: Determine What’s Expected of You on Tax Day
While you are preparing everything to meet with your CPA, another thing to keep in mind is what payments may need to be paid on April 15th. Beyond what you may owe for prior year taxes, you may also have the following to consider:
- IRA contribution
- HSA contribution
- 1st quarter estimated taxes for 2022
Work With Tax Professionals and Meet Your Tax Deadlines
Working with a tax professional will not only help to ease some anxiety around tax filings, but they should also be working on all possible tax things to do by April 15th to keep everything moving. They will also ask for other forms you may have missed. Don’t be surprised if they ask you questions on other purchases you may have made, there are usually nuances they will come across to help save taxes or to make strategic decisions. Tax professionals will not only make sure your tax season is pain-free and successful, but they’ll ensure that no stone is left unturned as you file your taxes. Dealing with the IRS doesn’t have to be difficult; contact our team today and we’ll help you navigate tax season successfully.