Businesses usually start preparing for tax season in the first quarter. It’s important to organize the paperwork so you can create a return that’s accurate and doesn’t hold any financial surprises.
Many decisions you make every day affect your tax obligations. By learning how to prepare tax papers for your New York business early on, your business can stay on top of things. Whether you have your own team or want to consult with a tax service in NY, here are some key initiatives worth taking:
#1: Choose your tax preparer
A tax preparer prepares, calculates, and files income tax returns on behalf of individuals and businesses. Some tax preparers have credentials from third-party organizations, while others don’t.
If you don’t have a tax preparer, ask friends and advisors (like an attorney you know) for recommendations. It’s important to make sure the person you choose has a preparer tax identification number (PTIN). Make sure you ask how much they charge, which usually depends on how complicated your return is.
#2: Get your tax paperwork organized
By the end of January, you should have all the tax documents you need from your employer, bank, brokerage firm, and others. Make sure each form matches your records.
Here are some of the most common forms:
- Form W-2 if you are employed
- There are 1099 forms that report dividends (Form 1099-DIV), interest (Form 1099-INT), and nonemployee compensation paid to independent contractors (Form 1099-MISC)
- Form 1099-B is to report a broker’s gains and losses on securities transactions.
- Form 1098 reports any mortgage interest you paid.
Organizing your records in advance will save you and/or your preparer time, which means lower fees.
#3: Know your qualified deductions and credits
Tax deductions and credits are key to filing. Taking advantage of deductions reduces your taxable income, while taking advantage of credits reduces your tax bill.
There are a lot of business tax credits, and the IRS website has a list of credits that apply to different industries. Credits are plentiful, so check with your tax preparer or answer questions about your business operations if you’re using a tax prep software application.
#4: Make a list of business expenses
Another way to save time and energy before tax time is to itemize, categorize, and detail your expenses. You’ll be able to claim the maximum benefit from your expenses if you work closely with any support you may have with bookkeeping and account management. Also, the IRS has a business expenses explainer that explains what you can claim.
#5: Estimate your payroll taxes
Payroll taxes should be calculated throughout the year along with expenses and deductions. IRS installment plans might be a good option if you are a small business that needs some breathing room. You might be eligible if you owe less than $25,000 in combined taxes, penalties, and interest.
#6: Plan your succession
If you had an accident or health crisis, what would happen to your business? Business owners should analyze and figure out what they need to do to keep the business going. You can also get tax benefits from succession planning, so check with your lawyer and accountant. By organizing these tax records now, you’ll be able to file business taxes faster and easier later. By getting these details together now, you’ll reduce stress for you and your team.
Prepare your information well ahead of time, and you’ll have a better chance of filing an accurate and complete return. Small business owners know that preparation and planning ahead are key components of success, not just checking taxes off a list at the end of the year.
We’ve Got You Covered for Tax Season
When prepping your taxes, planning and compliance can feel overwhelming. Melanin Tax offers tax preparation services in NY that improve our clients’ lives by keeping them prepared.
Every year, tax rules get more complicated, and many decisions affect your finances. As a trusted tax prep company in NY, our team understands the complexities of tax laws and the unique nuances of your financial goals. Our comprehensive and personalized approach helps clients like you reach their goals and feel confident about tax and financial decisions.
Schedule a free consultation with us by booking here or by calling (347) 943-6772.