Tax season is quickly approaching. Due to the pandemic, Tax Day was moved to July in 2020. However, this year the infamous April 15th date is back. Now is the time to get organized to save yourself stress and avoid rushed errors.
While filing dates vary depending on the business’s structure, many small businesses are considered pass through entities, meaning they are taxed in a similar way to individuals and are subject to the April 15th deadline.
As you prepare your business’s 2021 tax filings, keep these tips in mind:
- Review Business Tax Return
Before you begin any paperwork, review a copy of the business tax return to see what information is needed. If there are any questions about the form, be sure to address them before continuing with the process.
- Organize Tax Documents and Paperwork
The Internal Revenue Service (IRS) has announced that tax season will begin on Friday, February 12, 2021. This is the date the agency will begin accepting and processing 2020 fiscal year returns.
To ensure a timely filing, businesses should begin to get their books ready. Additionally, many companies have begun sending out and receiving essential tax documents. Be sure to have the documents organized early. You are able to begin your paperwork as soon as you’d like, but the IRS won’t begin processing until February 12.
If you plan to work with a tax preparer, you will need key documentation, including proof of identity, your Employer Identification Number (EIN), proof of gross receipts, bank account information, and business expenses.
- Deductions, Credits, Loans
For businesses, taking advantage of tax deductions helps reduce your taxable income, while credits help reduce your overall tax bill. Both are a critical part of the tax filing process. The IRS offers many credits that apply to different industries. Be sure to check if there are credits available for your business.
Because of the pandemic, the government offered new programs and tax incentives in 2020. These include the Paycheck Protection Program, Economic Injury Disaster Loan (EIDL), payroll tax deferment, Families First Coronavirus Response Act (FFCRA), and more. These programs and incentives might impact your 2021 filings. Be sure to discuss these with a tax accountant.
- Avoid Errors
This seems self-explanatory, but if you are in a rush to complete your documents, errors will happen. Before you submit your return, double check all information to avoid common mistakes, including an incorrect EIN number, failing to report all your business income, math errors, and more.
- Apply for an Extension
Similar to individual filings, businesses can request an extension from the IRS. This gives you an additional six months to file your taxes. While you still must pay the taxes that you believe you owe, this extension provides an advantage for companies who might need clarity on certain issues or have a harder time getting the right paperwork in order. To apply for extension, you must use Form 7004.
Tax season is stressful for everyone. But with a little prep, hopefully the process will be smooth sailing.