Little joy can be found in tax season, especially if you’re a small business owner. No matter how prepared you try to be, problems can easily pop up, and they have to be dealt with before preparing your tax return, or Uncle Sam might come calling. There are some common tax stressors that plague many small business owners. Read on for their solutions:
You can’t find your receipts. If your receipt management system consistently falls under a “I’ll deal with it later” motto, then chances are this time of year is torture for you. Not being able to find the receipts you need to prove your deductions is annoying and can be costly. But if you can’t find several needed receipts, there are actions you can take to help prove to the IRS that your deductions are legit. For example, you can likely prove mileage and trip expenses through credit card statements and calendar entries. For deducting the cost of items purchased–for example, that new coffee maker in the breakroom–take a photo and document the purchasing details that you can recall. And once you’ve got this year’s info together, download an app that will help you manage this info so that you won’t be in the same situation next year.
Your employees have mistakes on their W2s. If an employee notices a mistake on their W2, it’s important that you issue a correction as soon as possible. A corrected W2 is called a W2c. The best way to avoid this stressor is to verify all employee information prior to preparing W2s. There is also W2 software available that will make filling out and filing these documents a lot easier.
You didn’t make any estimated tax payments. For individuals the joy of paying income taxes happens only once a year. But business owners must comply with a “pay as you go” system that requires you to make estimated tax payments four times during the year. If you didn’t make any estimated tax payments, you may be subject to penalties in addition to your tax bill. So, go ahead and prepare for those added expenses. You should also consider putting a plan in place for making estimated tax payments for the current year. That way you won’t suffer the same trouble next year.
You don’t have the funds to pay your tax bill. Not being able to pay your tax bill is scary, but it’s a reality you may face, especially if you didn’t make any estimated tax payments during the year. So, what should you do? Work with the IRS. They may be able to give you additional time to pay, or if you meet the requirements, set you up with a monthly payment plan (although you can only do this if your estimated tax payments are current).
If you’re struggling with any of these or another tax issue, one of the best things you can do is set up an appointment with a tax expert. It will be money well spent as they’ll be able to give you the guidance that could help you avoid a costly audit, and you’ll be able to rest a little easier when you send your return off to the IRS.