Business Owners, It's Tax Time. Are You Ready?
This past year has been crazy for just about everyone, and now’s the time to do one last thing to put 2020 in the rearview – file your taxes. Tax season can be stressful in the best of times, so we talked to some tax professionals to get some tips that may help you.
What do you need to file for your business?
If you're a Sole Proprietor, your business return is filed as Schedule C on your 1040 individual tax return, which is due by April 15. As your business continues to grow, or you bring on partners, there are different types of returns. (This is a good time to point out a Limited Liability Company (LLC) is a legal classification, not a tax entity election.)
Do you know when your taxes are due?
In a perfect world, your tax prep is ongoing, as successfully filing largely depends on two things - good bookkeeping and knowing your deadlines. If you know keeping organized financial files isn't one of your talents, consider hiring an accountant or investing in software to make bookkeeping easier.
Gather Your Paperwork
Good financials make for great tax returns. The paperwork required to complete your taxes will vary by business type and factors like the number of employees. However, there are some common documents every company needs:
- Records of all business income and expenses. You should scan your receipts as they tend to fade and can be easily misplaced. Check your online banking or bookkeeping software to see if it's possible to attach receipts to your expenses on an ongoing basis.
- If you have business vehicles, be sure to keep the bill of sale to determine total cost, financing terms, etc. In addition, keep mileage logs throughout the year to claim a deduction for business use of automobiles.
- Make sure your electronic documents are backed up regularly. It doesn't matter how good your records are if you lose the files.
- Keep business records easily accessible for a minimum of five years.
Even if you've successfully handled your company's taxes yourself in the past, there have been changes over the past year that could warrant using a CPA or other tax professional for your 2020 filing.
- One good resource is the IRS itself. They provide tax information, resources, and tools for for businesses and those who are self-employed.
- There are some significant changes related to the CARES and FFCRA Acts, including:
- If you're self-employed, you can defer half of your 2020 liability for the Social Security tax component of the SE tax.
- You can claim credits to cover: (1) mandatory payments to employees (or yourself) who took COVID-19-related sick leave between 4/1/20 and 12/31/20 and (2) mandatory payments to employees who took time off between those dates under the FFCRA's emergency family leave provisions.
The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.