Tax time is the most dreadful time for a business owner, but it doesn’t have to be! With the right information and know-how, you’ll be golden.
What are some things to have on hand at tax time?
You’ll definitely want to have the following ready to go for your accountant to review and get your IRS paperwork ready to file:
- W-9 for all contractors / vendors;
- Bank & credit card statements;
- Receipts for all business-related expenses (this is a big one);
- Any mileage logs if you’re writing off vehicle-related expenses;
- Your EIN or SSN, depending on how you file your taxes;
- Your webfile number for online state-level filings (i.e. Franchise Tax, Public Information Report, Sales & Use Tax, etc).
What if some expenses are personal and some are for business?
This is more of a question for an accountant, but generally speaking, you can ‘write off’ expenses that are split between personal and business, but only to the degree that they are business-related. For example, if you operate your business out of your home, you may be able to write off a portion of your rent/mortgage, utilities, and other expenses. The IRS actually has an article on this exact topic – definitely check it out!
Not everyone’s business is taxed the same way…
Depending on how your company is structured, the IRS taxes it in a certain way. For example, if you are the sole owner, meaning you are the only owner/shareholder, your business is by default considered and taxed as a Sole Proprietorship. This means the business does not file and pay for its own taxes, but rather they are reported and paid for on your personal taxes, even if you are legally structured as an LLC! This took me awhile to wrap my head around, but the IRS has an article on this topic also, which you may find helpful. In fact in that very IRS article, you’ll also see that an LLC can elect to be taxed as a corporation, which may have tax benefits; this may be a conversation worth having with an accountant!
Use software throughout the year to make it easier at tax time!
You may have come across QuickBooks Online and other platforms that give you the tools to track your income and expenses, log those receipts, and even run your own Profit & Loss reports. These software options are fantastic and should absolutely be looked into, as they aid you in tracking everything throughout the year and become especially useful around tax time! I’d recommend you at the very least implement a free alternative if your budget cannot accommodate software expenses; look into Wave’s accounting software.
I hope this article helps you and your business!
With Honor,
~ Aerias & The HA Team