Every year, April can be a stressful time for business leaders. Although the 2023 tax season has wrapped up, it’s never too early to start preparing for the next year.
Whether you’re a seasoned entrepreneur or new to the game, I’ve found that staying organized and informed can make all the difference. The basics of filing taxes remain constant; however, there are always new strategies and methods that can enhance the process to be more rewarding. Here are some tips on how to get ahead this upcoming year:
1. Stay updated on tax law changes, and consider working with a professional.
Tax laws can always change, so staying informed will be super helpful to ensure you’re filing correctly. A tax professional can be key to keeping you updated on new laws or regulations. I recommend small or large businesses look to work with a professional who has worked with similar types of companies or industries. Having someone who understands the nuances of your type of business can make a significant difference in how your taxes are handled. These professionals can guide you to make smarter decisions for your business in the long run.
In my experience, the best way to find a professional is through references. Tap into your network and sift through recommendations to find the perfect fit for your needs. Referrals from trusted companies can help you get a qualified individual with a proven track record with businesses like yours.
2. Gather your documents early.
Don’t wait until the last minute to gather your tax documents. Ideally, you should collect any relevant documentation months before the deadline. The earlier you start, the easier it is to address missing information or documents.
Unlike personal taxes, business taxes will need more documentation. First, employee payroll records—i.e., W-2 or 1099 forms—should be collected and organized as soon as they are available. All expense reports and receipts related to travel, meals, entertainment and supplies are essential to claim deductions. Bank statements should also be collected as they are needed for income verification and financial reconciliation. Lastly, if the business took out a loan, any supporting documentation will be needed.
Having all your documents in one place makes the filing process smoother and minimizes the risk of overlooking important information. I suggest you keep organized records throughout the year as this ensures that you have everything you need by the filing time.
3. Utilize technology.
It’s time to leave behind the era of hoarding all your receipts. In the age of technology, there are a plethora of apps and software designed to streamline the tax filing process.
First and foremost, when using any technology, make sure they have robust privacy and security measures in place. Data encryption, two-factor authentication and regular security updates are things to look for to protect your sensitive financial information.
Technology that is reputable and reliable generally has stringent security measures ensuring that sensitive information is protected.
Filing your taxes electronically can offer several advantages over paper filing, including faster processing. Most tax preparation software also provides guidance and assistance throughout the filing process, making it easier to navigate complex tax situations and file correctly.
As amazing as these platforms can be, make sure to back up your records regularly. Some websites offer automatic backups; these can help prevent data loss in case the system fails at any point.
4. Look into the available deductions and credits.
The goal for many businesses is to take advantage of deductions and credits to reduce tax liability. This may include deductions for charitable contributions, equipment expenses and more.
Besides getting insight and advice from a tax professional, reading the IRS website, tax journals and financial news sites can help you stay up to date as well. You can find webinars and seminars that focus on tax planning and strategies. These events can help provide a lot of information and answer specific questions. By building your knowledge of what can be declared as a deduction or credit, you can then go through your records and be able to pinpoint new ones.
5. Don’t fear audits.
While the thought of an IRS audit may seem daunting, don’t let fear dictate your tax filing strategy. If you’re entitled to deductions and credits, don’t be afraid to claim them! If you have the documentation to back up your claims, an audit should be no issue. I’ve found that being prepared is the best defense against any audit.
6. Double-check your information.
Before submitting your tax return, take the time to double-check all the information for accuracy. Correcting mistakes before filing can help prevent delays and potential audits. Ensure that your information is correct, and review your deductions for any errors or omissions.
7. File on time or request an extension.
Make sure to file your tax return by the deadline to avoid any late filing penalties. If you are unable to file by then, you can consider requesting an extension to buy yourself more time. An extension to file does not extend the deadline for paying any taxes owed—be sure to pay any remaining tax liability by the original deadline to avoid additional penalties.
Preparing for any tax season requires a lot of planning, organization and attention to detail. As we close out the second quarter of 2024, it’s great to already be ahead in staying on top of your taxes. With these tips in mind, navigating the next filing process will be much easier and seamless, while ensuring that you’re maximizing your deductions and credits.
Remember to stay informed, gather your documents early and seek professional assistance if needed to make the most of this tax season.
Written by Phil Dushey, CEO and President of Global Financial Services, Global Church Financing, and Global Financial Training Program.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
See other sources: https://www.forbes.com/councils/forbesbusinesscouncil/2024/06/21/how-business-leaders-can-prepare-for-tax-season/
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