Make filing your tax return easier
Consider these suggestions for helping to make tax season smooth sailing this year for your small business:
- Make your estimated tax payments. Tuesday, January 18th, is the due date to make your 4th quarter payment for the 2021 tax year. Now is also the time to create an initial estimate for the first-quarter 2022 tax payments. The due date for this payment is Monday, April 18.
- Reconcile your bank accounts. Preparing an accurate tax return starts with accurate books. Reconciling your bank accounts is the first step in this process- consider it the cornerstone on which you build your financials and your tax return. Up-to-date cash accounts will also give you confidence that you’re not over-reporting (or under-reporting!) income on your tax return.
- Organize those nasty credit card statements. If you use credit cards for your business, try creating an Expense Report for these expenditures. The report should recap the credit card bill and place the transactions in the correct expense accounts. Attach actual copies of the expenses in the credit card statement. You will need this to support any sales tax paid in case of an audit. When filing your 2021 tax returns, keep in mind federal and state initiatives.
- Reconcile accounts payable. One of the first tax deadlines for many businesses is issuing 1099 forms to vendors and contractors at the end of January. Get your accounts payable and cash disbursements up-to-date; this way, you have an accurate account of which vendors you paid.
- Get your information reporting in order. Now identify anyone you paid during the year that will need a 1099. Look for vendors that are not incorporated like consultants nor in the gig economy. Also, remember your attorneys. You will need names, addresses, identification numbers (like Social Security numbers), and amounts billed. Send out W-9s as soon as possible to request missing information.
- File employee-related tax forms. If you have employees, file all necessary W-2 and W-3 forms, along with the applicable federal and state payroll returns (Forms 940 and 941). Do this as soon as possible in January to allow time to identify any potential problems.
- Compile a list of all major purchases. Prepare a list of any purchases you made during 2021 that resulted in your business receiving an invoice for $2,500 or more. Find your detailed invoices that support the purchase and create a fixed asset file in order to create the list. This spending will be needed to determine if you wish to depreciate the purchase over time, take advantage of bonus depreciation, or expense the purchase using code section 179. Your choices create a great tax planning tool.
- Review the impact of COVID-19. When filing your 2021 tax returns, keep in mind federal and state initiatives. Be prepared to share your employee retention payroll credits or Paycheck Protection Program loan information when filing for 2021 tax returns. It is important to correctly account for these funds.
Should you need help, please reach out for assistance.