So it’s your first year in business and you have finally figured out most of the ins and outs of how to manage it to keep it afloat, but then tax season rolls around and you have no idea what you need to do. You probably remember the very first time you had to file your income taxes and how foreign the entire concept must have felt. Now that you’re a business owner you find yourself treading in uncharted waters yet again. As a business owner you want to ensure that you receive the maximum tax refund, but how do you go about doing it? Also read the Sarkari result here
For more information, you can also check out this article titled Easy Tips For Filing Taxes For Small Businesses. Here are some important considerations to remember when filing your small business taxes for the first time:
Review Your Small Business Tax Return Carefully and Completely
Just like with any other important document you plan to file and submit, your business tax returns must also be reviewed carefully before you file them. See which line items are going to be filled up along with the exact amounts. There might also be questions on your return, so you’ll want to make sure that you have answers for these questions just in case. Some of these questions may include what the nature of your business is, its location, and how long it’s been in operation.
Your chart of accounts must have all the correct information in it, so make sure that you review them thoroughly as you fill out your return. While all businesses are required to have a complete and accurate collection of their records, there are those that are unable to reach this mandate without ensuring that they comply with the law.
Know Which Accounting Basis to Go With
As a business owner one important choice you need to make with regards to your tax returns is deciding whether to have them prepared on an accrual basis or a cash basis. When filed under a cash basis your expenses are recognized once they are paid while income gets recognized once it gets collected. As for the accrual basis, your expenses get recognized once they are incurred while income gets recognized as soon as it is earned.
While most lenders prefer that you file your tax returns on an accrual basis, you can still prepare your small business tax returns through a cash basis even if your financial statements were prepared via an accrual basis. If you’re a new business, then you may have more unpaid expenses on your hands than uncollected income by the end of the year. You must therefore consider taking your additional net expenses as deductions, and filing on an accrual basis is the best way to do this.
However, once the business grows and becomes more profitable in later years your receivables should be worth more than your payables which means it will be getting more income therefore pay more taxes if it filed its returns using the accrual basis instead of the cash basis. Once you decide which basis to use when filing your tax returns it will stay throughout your business’s life span, so choose wisely.
Ask for Help If You Need To
Filing tax returns is not as simple as it looks and most people prefer to have a professional do their returns for them. If you need help in getting your small business tax returns done, do not be afraid to ask for it. Remember that filing business taxes is a whole different ball game from filing individual returns. It also requires more tax forms, probably more than what you use when filing your own individual tax returns. We also need to take into account the fact that most people don’t find the tax system to be as simple or intuitive.
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Going with experienced accountants is better for small business owners because these people spent years studying all the different rules and regulations of the IRS. Not only will they be able to help you get the most out of your returns, but they can even keep you from making costly mistakes as well. Before choosing an accountant, take the time to shop around for one that specializes in tax filings in your area.
Different states have different rules, so you will want to go with someone who is aware of this fact. If you have time, you should definitely check out this ebook Principles of Taxation for Business and Investment Planning 2020 for getting a good grasp on all tax issues.