5 Essential End-of-Year Tax Tips for SMB Owners
It’s time to discuss one of the most common questions tax preparers get from clients: What documents do you need from me to file my taxes? Many of us have wondered this and can use a gentle reminder, or we’re approaching a time when we’ll need to know.
After all, no one wants to be unprepared for tax season, thereby making the process needlessly complicated and unpleasant. To avoid being ill-prepared, follow the five steps below:
1. List All Charitable Donations You’ve Made
Before you talk to your tax preparer, contact all the qualified charitable organizations you’ve donated to this year and request that they send you a letter documenting your donation(s) if you haven’t already received it. Ask them to mail it to you in December (by January 31st at the latest). These letters are necessary so you can deduct these charitable contributions on your tax return.
2. Gather Together Your Bank & Credit Card Statements
Make sure to compile the past 12 months’ worth of your business’s bank and credit card statements so you have them available if your tax preparer asks you for more details about a particular purchase (for example, what’s the date you purchased an expensive piece of equipment?) And organize everything beforehand to make it easy for you to find what you need if necessary.
3. Document All Estimated Tax Payments You’ve Made
It’s imperative that you can show your tax preparer all the estimated tax payments you’ve made over the year to both federal and state agencies. This information will be included on your tax return so make sure to keep detailed records of all the payments you’ve made and provide this organized documentation to your tax preparer.
4. Document Health Insurance Coverage
Keep an eye out for forms 1095-A, B, or C to arrive, and then give these to your tax preparer. This is proof that you had health insurance coverage throughout the year. You should always keep any 1095 forms you receive with your tax records because your tax preparer may need them to report health coverage information on your tax return. If you paid health insurance premiums for yourself be sure to provide that information as well. You may qualify for the self-employed health insurance deduction.
5. Remember: An Extension = More Time to File, Not More Time to Pay
If you or your tax preparer decide to file for a tax extension, be aware that while this gives you more time to file your tax return, it doesn’t mean you can wait to pay. You will still need to include an estimated payment (otherwise known as a deposit) with your filing. Failing to make a payment by the original filing due date can result in penalties.
A Final Word From Tuesday Brooks Founder of AJOY Not all of us love paying taxes or figuring out all the accompanying tax forms and rules, right?! Fortunately, talking to a trusted tax preparer who specializes in working with small businesses can make this whole process much easier. That doesn’t mean, however, that you don’t need to do anything at all. Be sure to follow the suggestions above so you’re organized and prepared, which will ensure the whole experience goes smoothly and productively. Here’s to looking forward to a bright and profitable New Year!