Small Business End of Year Preparation for Tax Time
As the end of another year approaches, the time comes once again for small business owners in Charlotte, NC to prepare their small business tax returns. If you’re one such Charlotte small business owner, you know as well as anyone this is not always simple. Here are a few tips for handling those critical end-of-year tax preparations for your small business.
Basic Steps to Prepare Your Small Business Taxes
- Learn when taxes are due. – When are taxes due in North Carolina? This is essential to know in order to avoid one of the most common and avoidable tax penalties of them all: the late-filing penalty. While the personal tax-filing deadline for most small businesses is April 15, the deadline for some can differ depending on the type of business and its legal structure. The deadline for most S Corporations, for instance, is March 15. Additionally, a small business may have other tax-related tasks they must complete on a certain deadline throughout the year.
- Collect the necessary tax forms. – There are certain tax forms all small businesses need to include in their return. Generally, this comprises a summary page and some combination of supporting schedules and attachments. However, depending on the business structure, this could include a Form 1040, Schedule C, Form 1120, Form 1120-S, Form 1065, Schedule K-1 or some combination thereof. Moreover, there are certain additional forms a given small business may need depending on a range of factors.
- Collate all business income records. The IRS will require qualifying records of all business income, including gross receipts from all goods and services sold, documentation of all returns received and refunds issued, and investment interest and income records.
- Collate all business expense records. – Collect receipts for your expenses on overhead, insurance, professional fees, utilities, and supplies. Collect all available additional documentation for small business health insurance, meals, entertainment, and transportation expenses and claim the home office deduction.
- Confirm delivery and receipt of all required information returns. – As a small business owner, there are certain information returns you are required to send, such as W-2 forms for employees and 1099 forms for independent contractors. There are other forms you require from others, such as information returns on rental property rent, professional fees, or loan interest you’ve paid. Take accountability that you both meet these responsibilities.
If you believe you may need an extension in order to properly complete your tax return, request that extension as early as possible. You must file for an extension before your tax return’s original due date, and you still must pay your taxes on time.
Preparing at the end of each year to file that year’s taxes is also a prime opportunity to make proactive changes to your business model and accounting and finances to adapt to new changes in the small business tax environment.
Small Business End-of-Year Tax-Preparation Tips
When it comes to reporting income and expenses to the IRS, cash-based businesses have greater flexibility. A cash-based business only needs to record income and expenses when they actually come in or go out.
For instance, as the end of the year approaches, the owner of a cash-based small business can arrange with those still owing money to defer payment until after the new year. This way, the business owner can postpone claiming the income until the following year. The same applies to expenses. The same business owner can avoid claiming an expense by asking the recipient of the relevant check to hold off on cashing it until the following year.
For these reasons, analyze your small business’s cash flow at the end-of-year tax-preparation time to see what income and expenses you may be able to defer.
Make End-of-Year Investments and Gifts
In many instances, your small business can receive tax benefits by giving gifts and making investments. Each benefit, however, has certain qualifications you must meet to receive it.
For instance, you can receive a Section 179 deduction for making end-of-year capital improvements or upgrades like buying new equipment or other qualifying property for the business. In order to qualify for the deduction, however, the investment must make sense as potentially profitable for the business in the near or short term.
You can receive similar benefits for making charitable donations.
Identify Debts You Can’t Collect And Inventory You Can’t Sell
An unfortunate risk, and reality, of running a small business is not all inventory sells and not all debts can be collected. Fortunately, these losses are deductible, thereby reducing your taxable income.
The IRS only counts inventory as an expense when you sell it. If you unload any obsolete items and claim them as a loss, you can deduct the amount you paid for them as an expense.
The IRS approaches uncollectable debt similarly, although the approach differs somewhat depending on your business model.
The key to deducting unsold inventory and uncollectable debts as expenses, regardless of your business model, is maintaining complete and accurate records.
Hire a Charlotte Small Business Tax Advisor
The easiest and most efficient way to conduct all of these end-of-year small business tax preparations is with the aid of a small business CPA. With such an expert by your side, you can ensure your small business takes advantage of all available write-offs, deductions, and other tax benefits. A knowledgeable and experienced small business tax advisor can also help you stay up to date on all changes to laws and regulations affecting your small business taxes.
Of course, when searching for tax preparers in Charlotte, NC, you want to consider only the best tax preparers. With only weeks left in the year, that means there’s no time to waste in beginning your search.
Scott Boyar, small business CPA, is one of the best tax preparers in Charlotte NC. As your small business tax advisor, he can make sure you file your return properly and on time, paying the least possible and claiming the most in deductions. Contact Scott Boyar at 704-527-272 or online at sboyarcpa.com/contactus.