Tips for Filing Your 2020 Small-Business Taxes
Tax season is a busy time for everyone. Today’s small businesses have an increasing responsibility to get their business taxes done correctly each year — and proper preparation can ensure that all goes smoothly. From gathering those important documents to making last-minute donations or purchases, here are a few small-business tax tips to help you complete 2020’s filing efficiently.
Read Up on Changes
Business tax law can sometimes be complicated as it encompasses everything from expenses and payroll to health insurance. Learning about tax law changes early and often is the best way to make sure you’re following the rules and getting the maximum benefits available to you. Although the biggest tax changes took place during the 2018 tax year with the passing of the Tax Cuts and Jobs Act, you may still be adjusting to those changes. Whether you consult with a tax professional or you read top business publications for updates, make tax regulations part of your steady learning menu.
Gather Documents When You Can
Rushing to gather all the relevant paperwork needed to file your taxes can sometimes be frustrating. Instead of throwing your tax expert anything you can find last minute, consider gathering important files on a monthly or even weekly basis throughout the year. For those who rely on digital documents, such as expense reporting software, be sure to back up files regularly and compile the information in a way that’s easy to add up at the end of the year. It’s never too late to start making good choices in how you store and organize those files. Audits can occur for up to seven years from the filing date; you could be saving yourself a headache by making changes now.
Look for Last-Minute Savings
Whether you’re a sole proprietor or a large corporation, there’s still time to take action and save on your final tax bill. For individual business owners, this could include contributions to your retirement account, such as an IRA, which offers pre-tax benefits. (You have until April 15 of 2020 to contribute and have it count for the 2019 tax year.) Both sole proprietors and corporations may profit from making charitable contributions, as well. Finally, don’t discount any purchases you made in 2019 for this year’s travel or events. If you booked a flight in 2019 for a business conference in 2020, it’s a business deduction for the 2019 tax year.
Do a Trial Run
One way many small-business owners can avoid surprises or high tax bills is to do their taxes now. Many tax software solutions will let you plug in your numbers and get a preview of what you’ll owe. For example, through Mastercard’s partnership with TurboTax, you can use their business version and start filling in the data whenever you’re ready.
This also helps you determine if you’ve made large enough estimated quarterly income tax payments, which are due four times a year. January’s payment is your last opportunity to catch up on too-small payments and avoid a penalty for underpayment. Using tax software prior to January 15 gives you a shot at staying on track if you earned more than you planned in 2019.
Preparing to File
With the new tax season approaching, do what you can now so that you’re better prepared to file. Not only will you save yourself time and stress, but you could save money, as well.