If you haven’t already filed your taxes, now is the time to get your information together to ensure that they’re filed on time and avoid costly penalties and unnecessary stress. It’s also the perfect opportunity to start organizing your taxes for the next filing season.
There are a few steps you can take now to develop healthy financial habits that will make filing much easier now and in the future. Here are just a few to get started.
1. Know the important dates for your business’s tax filings
While exact due dates may vary year-to-year because of holidays or weekends, it’s essential to be aware of the general annual due dates:
- Partnerships, S corporations, and multiple-member LLCs are generally due by March 15 each year
- Sole proprietorships and single-member LLCs, which are filed on the schedule C of the personal tax returns, are due by April 15 each year
- Corporations that use the calendar year as a fiscal year are also generally due by April 15 each year
Set an alert in your calendar for at least two weeks before each of the IRS’s quarterly filing dates; otherwise, you could end up with late-payment penalties for missed filings. Check your state’s deadlines, too—they’re typically aligned with the IRS’s, but not always.
2. File your year-end taxes on time
If you haven’t already filed your taxes, you should at least have your financial information ready for your accountant. Take these steps ahead of time:
Ensure that your business financials are complete and schedule a meeting with your accountant. If you are a sole proprietor or single-owner LLC and file your personal and business taxes together, make sure you come prepared with your personal financials as well. Gather all pertinent income and expense information, as well as receipts. Bookkeeping software programs like QuickBooks and Xero make it easier to track income and expenses. These programs are affordable (or even free), so we encourage all small business owners to use them to manage financials online.
Follow up with your accountant at least a week before your company’s filing deadline to ensure that your taxes are submitted on time and make sure to request a filing receipt. If your accountant doesn’t have all the information they need to file it can cause delays, so be sure to respond quickly to your accountant’s calls or emails.
3. Prepare now for next season’s taxes
Make sure you’ve got the right accountant for your business.
A great accountant is an essential part of your team—someone who ensures that your books are set up properly, and also helps you make strategic decisions about business investments, expenses, loans, and other financial matters.
Early in this new tax year, assess whether you’ve got the right accountant for your business:
- Meet with your accountant quarterly (starting just after tax season) to learn strategies for tax savings and long-term growth. This can reveal whether your accountant is on board as a part of your business’s success team or is simply acting as a tax preparer.
- Ask about how their experience and clients align with your business or industry. Having knowledge related to your business shows that your accountant has nuanced insight that can benefit your company.
- If you know of their other clients (or can get references), ask if they’re satisfied with the relationship. It’s also advisable to check accreditations and licensing.
4. Update and maintain your financial records throughout the year
It takes about a month to form good habits (or to break not-so-productive ones), and the benefits of maintaining business financials on a daily basis are well worth the time investment. You’ll make smart, on-point and timely strategy changes and if you apply for a loan, potential lenders can easily assess your company’s financial position and will appreciate your great management skills.
Use this next month to get your business’s financials in order:
- Update your online financials daily. Some businesses, like restaurants and retail, will have many transactions throughout the day, and others may only have a few all month long. Regardless of which bucket your business falls into, get in the habit of checking your financials at the end of each day. Over time, you’ll find that you’re far more in-tune with how money is earned and spent and where there’s potential for growth or savings.
- Inform your accountant of all fixed-asset purchases that you’re planning (or have made) and about your company’s debt. The interest you pay on loans made to the business will be added to your company’s profit-and-loss statement as an expense, decreasing your taxable income. You can also use this information to leverage the tax code, as many large business expenses may qualify as business write-offs.
5. Stay on top of tax payments throughout the year
Far too many small businesses are derailed by unpaid taxes that accumulate throughout the year and, sometimes, over several years.
To avoid this:
- Keep track of due dates for quarterly and year-end filings for your estimated income taxes, as well as others like sales tax, and set reminders on your calendar of tax-payment due dates.
- Set aside estimated tax payments from your monthly revenues and deposit them in a separate bank account. This way, you’ll always have the money on hand to pay your taxes. If you haven’t already set up a separate business bank account, do it right away and don’t mix your personal and business expenses.
Small business taxes: You’ve got to pay them, so be smart about them
There can be tremendous business benefits when you approach tax seasons strategically—as well as painful financial consequences when you don’t.
Use these simple tips, as well as others that your accountant can share that are specific to your business or industry, to help you make the most of this inevitable business expense.