It’s tax season again, and I want to make sure my readers are prepared. Today, I’m going to go over the steps you need to take in order to prepare for taxes. Make sure you follow these steps so you can have a stress free tax season.
6 Steps for a Stress Free Tax Season
Step 1 – Get Your Books in Order
Bookkeeping is an essential aspect of running your own business. You have to account for every bit of money received and spent.
There are lots of programs that make bookkeeping easy. QuickBooks Pro is one such program. QuickBooks Pro is incredibly easy to use, and it allows users to create reports that can be exported to their accountants. Additionally, it allows business owners to understand how much they are actually earning each month, quarter and year.
QuickBooks Pro costs $229.95. You can purchase the program at http://quickbooksonline.intuit.com/.
The free version at http://www.nchsoftware.com/accounting/index.html.
If you don’t want to spend the money on accounting software, you can consider using Express Accounts Accounting Software. There is a free version of this software available for small businesses that have fewer than five employees.
Once you download your software, input all of your financial information and transactions. If you paid someone, put it in the software. If someone paid you, put it in the software. Also, put all subcontractor data and bank account information into the program. Then, you can move down to the next step.
Step 2 – Get Organized
While most people never get audited, it’s still important that you’re prepared just in case the IRS decides to check your taxes. Thus, you need to keep all of your receipts throughout the year. Additionally, you should hold on to those receipts for three years after you file the taxes.
It’s a good idea to keep all your receipts in a file. The file should include receipts for:
- Any computers or devices you purchased for your business
- Ink, paper and other supplies
- Your work related mileage
Basically, you need to get a receipt for every work related expense, no matter how big or small. Then, you need to put the amount of the expense into your accounting software and save the receipt.
Now let’s move down to the next step.
Step 3 – Measure Your Office
You have one more step to complete before you can file your taxes. You need to measure your office. In most cases, you can deduct office space, but you need to have an accurate measurement. Get out the tape measure and determine how many square feet your home office is. Then, move down to the next step.
Step 4 – File Your Taxes
If your business made more than $400, you’ll need to file your taxes. You have two options for this. One, you can file them on your own. I do not recommend this. Business taxes are more complex than personal taxes are, so it’s really worth spending money on an accountant. However, if you decide to take care of your taxes yourself, I recommend that you get some software that will make the process easier. TurboTax is a great program for filing businesses taxes. This is just one of the countless programs available.
If you choose to go to an accountant, create a file from your bookkeeping software, print it out and take it with you. Then, sit down with your accountant and answer any questions he has. After that, he’ll be able to do your taxes for you.
Step 5 – Pay or Set up a Payment Plan
Once your taxes are filed, you’ll have two options. You can pay the balance in full, or you can set up a payment plan. If you have the money, I highly recommend that you pay in full. Otherwise, you’ll have to pay interest and penalties.
That being said, there might be times when you simply cannot pay the bill in full. If that’s the case, you can sign up for a payment plan. It’s not difficult to get approved for a payment plan. Simply go to http://www.irs.gov/individuals/article/0,,id=243335,00.html and apply for an installment agreement.
Step 6 – Make Estimated Tax Payments
You’ll get a little break after you pay your taxes, but then you’ll need to start making your estimated tax payments for the new tax season. You need to make these payments four times a year. Before you can make the payment, you have to come up with an estimate for the amount you owe.
You only have to make estimated tax payments if you expect to pay more than $1,000 in taxes for the year. If you owe more than $1,000 and you fail to make estimated tax payments, the IRS will charge you interest and penalties.
You can find all of the information you need on estimated taxes at http://www.irs.gov/businesses/small/article/0,,id=110413,00.html. Go through the document to find out what type of form you’ll need to fill out and how you can determine your estimated tax amount.
Keep these steps in mind as you prepare for tax season. Also, remember that tax preparation is a year long process. Keep up with your bookkeeping duties and send those estimated tax payments into the IRS!
Hope to help.