A Short Guide for Managing Small Business Tax Filing
Small business owners have a lot on their plates, from ensuring a healthy cash flow to figuring out payroll taxes. Many entrepreneurs stay busy seven days a week with their various responsibilities, which makes it easy for small things to slip through the cracks. Unfortunately, things can get complicated when tax time rolls around if there’s a lack of organization.
That’s why it’s so important to find an accounting service that can help you stay on top of your weekly and monthly expenses and prepare the right forms. It will also help for you to be knowledgeable about your business’s needs and how to prevent problems for next year. Here are a few tips from the Greater Wilmington Small Business Success Portal to help you stay on track.
Understand Employee Classification
Some small businesses have only a few employees, while others have full-time staff and hire out work to freelancers or independent contractors. It’s essential to understand the differences and how these employees are designated by the IRS so you can send them the correct forms — otherwise, you’ll be subject to fines.
The IRS has changed things up in regard to 1099 forms, introducing the 1099-NEC for all contractors, gig workers, and non-employees who were paid more than $600 in a year. The older 1099-MISC form is still in use, but should only be used for expenditures such as rent paid, legal settlements, or awards. In previous years, the 1099-NEC form was only available by request, but you can now download it yourself for online 1099 filing, making the process much smoother. Filing through a trusted platform also simplifies the process considerably and helps you avoid mistakes that could be costly down the line.
It’s important to come up with an organizational system that will keep all paperwork pertaining to full-time employees and contract, seasonal, and freelance workers separate. To help keep track of timesheets from employees and freelancers alike, as well as automate some parts of the payroll process, look into accounting software. You can also set up automated tax payments for payroll taxes, which can help you stay on top of deadlines to avoid hefty fines and penalties. And if you do get a penalty, accounting software such as QuickBooks Payroll will cover fines up to $25,000.
Get Your finances in Order
Even the most well-organized business can run into issues during tax time, so it’s best to stay ahead of the game by working with a reputable firm that can provide customized tax services to prevent any problems before they start. Keep in mind that tax laws aren’t static; they often change from year to year, and it can be frustrating to try and keep up with them. Hiring a professional accountant can save you a lot of time and money in the long run.
Keep Stressful Financial Decisions To a Minimum
Tax time is stressful enough without having to worry about financial situations such as debt or low cash flow, so it’s important to have a backup plan that will get you through tight times. You might turn to crowdfunding for different projects, or boost targeted ad placement on social media so you can boost your web presence and reach more customers. You can also look for government funding if you are a minority, veteran, disabled, or female business owner. Having a clear financial plan in place will eliminate some of the stress on your shoulders so you can focus on being prepared for tax time.
Making sure your business is in great shape come fall can be a nearly full-time job, so look for help from professionals who can keep an eye on your financial situation. Do some research to make sure you understand what your legal responsibilities are, as this will help you avoid fines and issues for next year. With a little planning and some resources, you can make preparing and filing your taxes a smooth and easy process.