Here are some comforting words for small business owners: It's not inevitable that you'll have a tax season panic attack. Planning now will make the process of completing and filing your tax return less of an ordeal.
If you're the kind who's always rushing at the end to get your tax forms filled out, the first thing you need to do is figure out, right now, what the problems are. And figure out how to fix them, even if it means hiring someone to organize your receipts and/or hiring an accountant to complete your return.
PUT YOURSELF ON A SCHEDULE
One way to make tax season easier is to set deadlines for yourself to get the different tasks done. For example, have your receipts sorted by Jan. 31. And make sure you have all your 1099s in hand (calling or e-mailing issuers if necessary) by Feb. 15.
This year, business owners who file Form 1040 and Schedule C (used by sole proprietors) or Schedule E (used by partners or S corporation owners) have three extra days to file their returns. Emancipation Day, a holiday in Washington, D.C., falls on Friday, April 15, the usual filing deadline. So all taxpayers have three more days to complete and file returns.
The March 15 filing deadline for corporations remains the same.
THINK ABOUT AN EXTENSION
If you think you're going to have trouble getting your tax return done because of business or personal reasons, plan now to get an automatic six-month extension of the filing deadline. There's no shame or harm in getting an extension. Accountants say there's no connection between getting an extension and being audited by the IRS. Many owners do it routinely because they're in partnerships and they can't complete their own returns until the partnership return has been done.
Many owners take an extension as a matter of course because it gives them more time to fund their retirement plans. The tax law allows for many plans to be funded, and a tax deduction taken for the previous year, by the due date of the owner's return including an extension. Or, in the case of the retirement plans known as SEPs, or Simplified Employee Pensions, an extension gives them more time to set up the plan.
Warning: Do not plan now to get an extension simply because you're the kind of business owner who leaves compiling your return until the last minute. Unless you change your tax routine now, you may end up in the same pickle when your extension runs out.
If your company is a corporation or you are a sole proprietor, you can get a six-month extension. Partnerships, however, can get only a five-month reprieve.
START HIRING NOW
If you need help of any sort to get your taxes done, get that help lined up now. If you realize on April 10 that you're in over your head, you can't expect an accountant or tax attorney to fit you into their schedule. In fact, if they do have the time to see you, the first thing they'll do is file for an extension for you.
Hiring an accountant now and letting him or her look over your finances may also save you money on your taxes. Even though 2010 is over, an accountant can start thinking about how to use the tax laws to your advantage. For example, if you had a loss, an accountant could help you decide whether to use part of it to offset taxes in past years. Or use it to offset taxes in future years.
If your books are in a mess and your receipts and invoices in a pile, this is also the time to get help to sort everything out and even create an organized set of records. Bookkeepers or accounting students can do this easily for you.
Source: The Associated Press.