It’s a date most small business owners have committed to memory: April 15th, the deadline for filing federal and state taxes in most areas and paying any tax owed. The days and weeks leading up to Tax Day can be overwhelming, so successfully making it through the deadline is a milestone worth celebrating.
The dust might still be settling on the 2023 tax season, but it’s never too early to look ahead to next year. In fact, with the most recent tax season fresh in your mind, now is the perfect time to reflect, evaluate, and plan for the future. In this article, we’ll cover tips and best practices to set you up for success in the next tax year and beyond.
Think Ahead Now for Tax Season 2024
The 2023 tax season is officially behind us, but it’s never too early to start preparing for 2024. On average, small business owners spend 23 hours filing their taxes (not to mention the time preparing and gathering forms!), with most of that time condensed in March and April—all on top of the normal pressures of running a business. One survey found that 43% of small business owners procrastinate tax preparation, most often because they don’t have enough time or don’t know where to start.
Instead, spreading the preparation across the entire year when possible and setting processes and systems in place now can set you up for future success and make the next tax season smoother.
Tips and Resources for Small Business Taxes
Tax season may seem overwhelming or daunting. In fact, taxes are one of the biggest stressors of small business owners, and 80% report feeling stressed around tax time.
But it doesn’t have to be that way. These best practices, tips, and resources can set your business up for success and reduce the risk of errors or major expenses.
- Create a system to track and organize your tax documents. No matter your business, you’re likely swimming in various tax documents, like receipts, purchases, and invoices. Instead of putting these documents in a pile (physical or digital) as they come in, having a system in place makes it easier to track what you have and still need and have everything in one place when it comes time to file your taxes. You’ll be less likely to miss a crucial document, which could impact your tax return or payment.
- Maintain your employee records. Personnel records are one of the most complicated areas of small business taxes. Throughout the year, keep important employee-related information updated and organized. This includes payroll information, benefits and withholdings, hiring and termination dates, and more. Even if your business only has a few employees (or just yourself), maintaining this information as it comes creates a much smoother tax season.
Define the type of business entity you’re running and its tax features. Depending on your type of business, you’ll likely have unique tax responsibilities and duties. Correctly defining your business sets the foundation for smoother tax filing. Small businesses usually fall into one of the following categories:
- Sole proprietorship: These businesses are typically owned by one person who includes business income on their tax return.
- Limited liability company (LLC): These businesses separate the owner from liability but pass through taxes to the owners.
- Corporation: These businesses provide the most distance between owners and liabilities, profits, and losses.
Leverage tax resources for small business owners. Taxes can be complicated, but you aren’t alone as a small business owner. There are numerous resources to help you through the process, including the following:
- IRS. It helps to go straight to the source. The IRS has a hub of information for small business owners, including links to commonly used tax forms, online learning videos, information on tax credits and deductions, and much more.
- U.S. Small Business Administration. This website walks small business owners through the entire tax filing process, including personalized information for each state and tax year.
- Chamber of Commerce. The U.S. Chamber of Commerce shares insights into changing tax regulation for small business owners. Many local and regional chambers of commerce also offer tax workshops and information for small business owners.
- Accountants who specialize in small businesses. You can hire someone experienced in your local tax regulations to help organize your documents and file your taxes. They can also be a great resource for managing your finances and ensuring you are making wise tax-related purchases. If you hire an accountant, consult them year-round, not just during tax season, to ensure you have the best processes in place.
With the right preparation and understanding of small business taxes, the months leading up to Tax Day will be less stressful, and you can remain focused on the growth of your business.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
