Most of the businesses have started doing their bit of sending out documents and are focussed on filing their federal income tax returns correctly.
Whether it is a small business or a conglomerate, everyone is taking their own time to correctly prepare their returns and face the tax day with full confidence. But, what are those few steps that every business owner shall ensure taking to be ready for the tax day? We have collated a list of 10 things that you shall undertake as a business and face the tax day like a pro.
#1. Keep estimated tax liability on reserve
The first and foremost advice is to stay ready with a reserve for the estimated tax liabilities. Full proof planning always leads to successful implementation. Therefore, all businesses shall ensure thorough tax planning beforehand to calculate their estimated liabilities and reserve funds to pay them when the tax bill arrives. You can consider using qualified plans like profit-sharing or defined benefit plans to reduce the additional amount of tax liabilities.
#2. Examine your charts of account
Accounting is an important part when it comes to filing tax returns. As businesses grow, they often witness newer categories of expenses and income. We suggest that you examine your accounts thoroughly with your CPA at every year-end to ensure proper categorization of all costs correctly. Doing so has many benefits, few of which are taking availing tax deduction, which relates to the expenses incurred by the business for operations or charity.
#3. Plan well to avoid tax liens
One of the other essential things to ensure is getting your financials in order and, more importantly, understand all your tax liabilities in an in-depth manner. Doing this extra mile planning will save you from any surprise tax bill and give you grounds to arrange for money in case of a shortage of funds or any financial issues. On failing to pay or defaulting on the tax bill, tax lien charges, which will make it difficult for you to get business or personal financing in the future.
#4. Think about all the possible reasons why things might go south
Another vital piece of advice is planning ahead of the tax season by assessing all the things that might go wrong and ensuring you are ready for the tax day. Doing this analysis will help you chalk out something that might not work in your favor and give you ample time to make amends. There are many digital banking tools available these days, which can help you identify bad spending habits and monitor clients who clear their dues late.
#5. Make huge tax-deductible investments before the financial year ends
To make significant capital investments before the 2019 tax season ends could be one good idea to avail of all possible tax deductions. Deductions can help you significantly reduce your tax bill. Therefore, now is the perfect time to buy new equipment or material and claim valuable deductions through these expenses. You shall ensure to make the full use of government-sanctioned tax benefits for businesses and ensure to make any upgrades or capital investments before the year ends.
#6. Prepare tax returns as soon as possible
There is one very simple funda about tax planning, which is that you shall aim to file your federal income tax returns as soon as possible and leave no room for any error or tax fraud. If you do proper tax planning, you can achieve the goal of filing early and find a good tax preparer who isn’t burdened with dozens of tax return filings and can concentrate when the files your returns. The catch here is that if you owe the IRS some tax dues, then you shall take your time to file the returns to get additional time to get ready, but in case you qualify for a tax refund, then filing on time can be the best thing.
#7. Review the impact of Executive Business Plans
The tax season becomes a reason for stress for most of the top-level business executives, and this is because they shoulder the responsibility of getting everything right. But, it doesn’t have to be this way. If you are a top-level executive, then you can always opt for high-impact executive benefit plans. These plans can help reduce all the tax-related stress by making a mechanism to pay year-round attention to financial decisions. Getting more time to work and worrying less about tax-related matters during the tax season is the other hidden benefit of subscribing to such plans.
#8. Hire an excellent financial professional
If you file your federal income tax returns yourself, then you already understand how daunting a task it is to do it yourself. It requires devotions to gather all the receipts, file out tax preparer’s organizer, and track income and expenses, which need continual data collection throughout the year, and that’s when you can plan your taxes well. Hiring a competent and experienced financial professional can save you on all this time, streamline and collate information about your business’s income and expenses and, in turn, save you a lot of time and effort.
#9.Keep important records safe
As a business owner, you need to ensure clearing all your business dues and keep a good record of the same. Such dues include employee and employer taxes. Therefore, you shall provide to pay them in time rather than struggling at the last moment for fund arrangement and keep a record of all the transactions in safekeeping. It can be terrific for your peace of mind, and tax reputation to prepare everything in advance and not procrastinate when it comes to business dues.
#10. Clearly define your income and expenses
Keeping good records becomes a critical pillar to pass through the tax filing season seamlessly. The cleaner and streamlined details you keep in your documents, the more relaxed you can be about filing income tax returns. To do this, you shall make it a point to define your income and expenses clearly. However, we still suggest that you set up a meeting with an experienced tax or finance expert to do tax planning before January end. In general course, November or December shall be the month wherein you shall know a clear state of your tax liabilities.
We know that almost every U.S. taxpayer dreads the tax day and hopes that he can clear all his tax dues in time. Well, just hoping isn’t going to work. Hence, every one of you shall adopt effective tax planning and keep yourself updated about the latest tax news and reforms to make the best of your tax returns and claim eligible tax credits and deductions. To assess the status of your tax return or to discuss all the aspects to go through this tax cycle with flying colors, you can contact your MyTaxFiler and get valuable tax insights.