Be prepared before your visit to the accountant office! Having all your documents in order…
Starting a business is exhausting and takes a lot of work to make it successful. Filing small business taxes for the first time can be an intimidating process that many people do not know where to start. We will go over some important things that everyone should keep in mind when filing their taxes as a new business owner, so they don't make any mistakes or overlook anything!
Before You File A Small Business Tax Return, Organize Your Records
One of the most important things that you can do when filing your taxes is to be organized. This means having all of your relevant records and paperwork in order so that you can easily find what you need.
The best way to organize your records is by year. Make sure to keep all of your invoices, receipts, bank statements, and business credit card statements. It is also a good idea to keep your monthly payroll summaries for quick reference each month as well as any other documents that are relevant to the tax filing process. Keep all of this information in an organized file box or folder, so you can access it quickly when needed!
Filing small business taxes for the first time can be a daunting task, but if you are organized and have all of your information in order, then it will go as smoothly as possible. It helps to have a CPA to assist with monthly bookkeeping, so when tax time comes around your financials are more in order.
Choose an Accounting Basis
Another important thing that you should keep in mind when filing your taxes is to choose an accounting basis.
The two main methods for determining the income of a small business are cash-based and accrual-basis accounting. These terms refer to how sales, expenses, assets, etc., are recorded on tax returns or financial statements.
It is important to understand the differences between these two accounting methods, as this will determine your taxable income. For example, if you are using accrual-based accounting, then you would need to include all of your sales that have taken place in the year regardless of when they were paid for. On the other hand, cash-basis tax accounting would only include sales that were actually paid for in the year.
When deciding which accounting basis to use, it is important to consult with a tax professional or your accountant. They will be able to help you decide which method will work best for your specific business and tax situation.
Make Sure You Understand Your Tax Obligations
As a new small business owner, it is important to be aware of your tax obligations.
There are a number of different taxes that you may be responsible for, such as income tax, self-employment tax, and excise tax. It is important to know which taxes apply to your business and how much you will need to pay each year.
You will also need to file quarterly tax payments, which are known as estimated taxes. This is a payment that you make to the IRS throughout the year, in order to cover your expected tax liability for the year.
Choose a Depreciation Method
When you purchase any assets for your business, such as furniture or a computer, you may be able to claim depreciation on them.
This is a tax deduction that allows you to write off the cost of the asset over a number of years. There are two main methods for claiming depreciation: straight line and accelerated.
It is important to understand the difference between these two methods, as they will affect how much of a deduction you can claim each year. For example, if using accelerated depreciation, then you would be able to write off more on your taxes in the first few years that you have an asset and less every year after that until it is fully claimed on your tax return.
Choose an Accounting Solution for Small Businesses
Some businesses choose to use a CPA firm to handle their accounting and other companies use an accounting software solution.
Instead of having to keep track of receipts and invoices spread out all over the place, you can easily organize everything in one organized folder. This will make bookkeeping much more efficient and reduce the amount of time it takes each month!
Separate Personal and Business Expenses
While filing taxes for your small business, it is important to be very clear on what expenses are personal and which ones can be claimed as a tax deduction.
For example, if you use the same credit card or bank account for both business and personal purchases, then this money will need to be separated once tax season rolls around. You should keep all of your business receipts and expenses in a separate folder so that it is easy to track what can be claimed on your tax return.
If you are not sure which expenses can be claimed as a deduction, then it is always best to consult with a tax professional or accountant. They will be able to help guide you through the process and make sure that you are claiming all of the deductions that apply to your small business.
When in Doubt Contact a CPA Firm in Raleigh!
At the end of the day, filing taxes for a new small business can be a daunting and confusing process.
It is always best to consult with someone who has experience working with small businesses like yours so they can help guide you through any confusing parts of the process. We provide tax services for our monthly accounting clients in Wake County.
C.E. Thorn, CPA, PLLC, a professional CPA firm with over 30 years of accounting expertise, is ready to assist! Contact us today at 919-420-0092 or fill out the form below.