Tax season is upon us, and with proper preparation you can ensure you meet critical deadlines, maximize your deductions, and have a hassle-free experience. Here are five ways small business owners can prepare.

#1 Organize Your Financial Records

Maintaining accurate records and tracking your expenses using software or with a professional can help you simplify the tax filing process and identify valuable deductions. Here are critical reports and documents you should begin organizing and have readily available before filing:

  • Income statements
  • Expenses and receipts
  • Quarterly tax payments
  • Profit and loss statement
  • Payroll taxes
  • Charitable donations
  • Forms required for your business structure
  • The previous year’s filing information, including the SSN or EIN you’ll use to file and dependent information

#2 Know Your Deadlines

There are three key deadlines to be aware of to ensure you avoid penalties and meet regulatory requirements: 

  • Tax day: The deadline to file taxes is typically April 15 unless the date falls on a non-business day.
  • Extensions: If you can’t file your taxes by the tax-filing deadline due to an emergency or other reason, you may apply for an extension, giving you an additional six months to gather information and file. However, extensions do not apply to any taxes you may owe, so you should plan accordingly. Learn more about how to file for an extension.
  • Quarterly payments: If required, ensure you’ve been paying your estimated quarterly taxes throughout the year by each deadline to avoid any penalties or interest. Regularly monitor this as your payments may vary based on your business’s performance and earnings.

#3 Understand Your Deductions

Beyond standard deductions, there may be specific deductions and credits related to your small business. Identify eligible deductions or work with a professional who can provide insights. Common deductions include:

  • Operating costs and business expenses, such as supplies, travel, and fees
  • Charitable donations
  • Retirement contributions
  • Marketing expenses
  • Home office and business vehicle deductions

Ensure you’ve kept records of all receipts and purchases for tax preparation and audits.

#4 Maximize Retirement Contributions

Reducing your taxable income is another way to manage your tax liability. Maximizing contributions to a retirement plan is one way to achieve that and provide future financial security. Here are some considerations to keep in mind:

  • Maxing out your retirement contributions may help you lower your tax bracket in the current year.
  • Be aware of contribution limits and deadlines for current-year contributions.
  • Consider catch-up contributions, which give people over 50 the chance to save beyond the standard limits.

#5 Partner with a Professional 

Tax preparation and filing can be complex, especially for business owners. We encourage you to work with a tax professional to help ensure accuracy, identify every tax-saving opportunity, and provide insights, such as:

  • Changes to tax laws and requirements
  • Identifying additional overlooked deductions
  • When to defer income or accelerate deductions, e.g., by strategically timing purchases or delaying collection payments
  • Which retirement plan is best for your business and personal needs
  • Staying on top of deadlines, required documentation, and compliance
  • How to reduce penalties or establish a tax payment plan

Early planning and a proactive approach can help your small business successfully navigate tax season. With organization and knowledge of available opportunities, you can help reduce your liability, stay compliant, and favorably position yourself for the future. For more small business resources, please visit our blog.