If you want to make sure that you and your small business are ready for the 2021 tax season, then it is essential to remain well organized throughout the year. You will also need to make sure that you have documents to support any exemptions that you plan to file.
Lastly, you need to know about all of the various tax deadlines that might apply to your business throughout the year. After all, missing a deadline can mean that you’ll be faced with some hefty fines!
In order to help, the team at Xendoo has created this guide to tax prep for small businesses. Our goal is to make sure that you have the tools you need to appropriately file your tax return this year.
Know the Key Dates
Due to the unprecedented challenges of 2020, the IRS extended the traditional income tax filing deadline to May 17, 2021. While it remains to be seen whether they plan to do the same for the 2021 tax year, it is a strong possibility.
The current deadline for business tax preparation and submission is currently April 15, 2022.
When you’re filing your income taxes, keep in mind that many self-employed parties and businesses must submit their projected tax payments every quarter. The filing dates for a business varies depending on whether they operate an S Corp, partnership, sole proprietorship, or corporation.
Other important types of fees that you need to account for during your tax prep include:
Traditionally, unemployment tax payments and payroll withholdings are submitted either monthly or semi-weekly. You must document these deposits and distribute the appropriate tax documents to your employees at the end of the year.
During the pandemic, businesses were given the opportunity to defer payroll taxes. Half of the deferred tax withholdings must be paid out to the IRS by December 31, 2021. The remainder of the unpaid balance is due by December 31, 2022.
When you’re planning out tax prep for small businesses, it is essential that you account for the excise tax, as well. If your industry is subject to an excise tax, these fees are usually paid monthly, quarterly, or annually.
It is important to stick to your prescribed payment schedule. For instance, annual excise tax payments are typically due by May 15th following the applicable tax year.
State Income Tax
Any tax prep for small businesses must also account for state income tax fees. While the federal income tax payment is currently due on April 15, 2022, each state sets their own deadlines.
It is important to check with your local tax collection authority to verify the filing requirements and any payment deadlines that may apply to your business.
Collect Key Information and Details
Once you are aware of all of these essential dates, it is time to collect some key information for tax prep for small businesses. You need to gather data on:
The cost of goods sold (COGS) is an essential metric that your small business must track. Not only is this data point important for tax purposes, but it will also help you to ensure that you are properly monitoring the health of your business.
In order to calculate COGS, you will need to know:
- The dollar value of your starting inventory
- Inventory purchases that were made
- Inventory dollar amount at end of year
- Inventory removed for personal use
- Materials and supplies
Without understanding your COGS for the tax year in question, you cannot accurately file your return.
Another essential part of the tax preparation for businesses is income. Make sure that you account for every income source as a part of your regular accounting and bookkeeping. You also need to keep track of various documents, including:
- Sales records
- Gross receipts from service or sales
- Checking and savings account interest rate accruals
- Incidental income, rental income, tax credits, etc.
Failing to properly list all of your income during a given tax year can create civil liability or cause you to incur various fines.
Tracking your company’s expenses throughout the tax year is also vital. By documenting and claiming these expenses on your taxes, you can gain access to various deductions and cost-savings opportunities.
Make sure that you document every business-related expense that you incur during the year, including:
- Computer-related expenses
- Travel expenses
- Contract labor
- Fees and commission costs
- Office supplies
- Attorney’s fees
- In-home office costs (if applicable)
- Estimated tax payments
- Insurance costs
Every one of the fees above can be claimed on your taxes. However, you’ll need to have proper documentation on hand to support these deductions.
Work with a Tax Professional
As you can see, tax preparation for businesses can be an incredibly complex process. That is why you should partner with a proven tax professional to ensure that your taxes are filed in accordance with state and federal regulations.
When they’re seeking out professional tax prep for small businesses, many companies seek out bookkeepers or CPAs (certified public accountants). However, it is important to understand bookkeeper or accountant costs before you commit to a financial relationship with a given provider.
Traditionally, a bookkeeper will charge anywhere from $30 to $90 hourly. CPAs charge more, due to their expertise. You can expect to pay approximately $150 to $450 hourly for a CPA. However, you might only need a CPA for occasional tasks, like audits or filing your tax returns.
If you are looking for an alternative option, consider partnering with an accounting service provider like Xendoo. We offer tax return and online bookkeeping services that are billed at a fixed monthly rate.
Some of the benefits of working with our team include:
Ability to Save Time and Money
Professional tax prep for small businesses can provide your organization with some huge benefits. For starters, it can help you save money.
If you miss a single tax credit or deduction opportunity, this mistake can cost you thousands of dollars. A professional tax prep service like Xendoo can carefully review your documents line by line to ensure that every single deduction is filed properly.
In addition to saving you money, relying on professional business tax preparation services will also reduce the amount of time that you have to spend filing various documents with the IRS.
For the inexperienced business owner, it can take hours to fill out and submit all of the required tax documents. As a small business owner, do you really have time to waste?
Tax Pros Can Resolve Common Issues
During the course of tax prep for small businesses, you are likely to encounter questions. If you want to be able to get access to professional help, Xendoo makes it easy.
When you’re working with a tax prep professional, you can ensure that you have all of the latest information on IRS filing requirements. If you run into an issue during the filing process, we will make sure that it gets resolved fast.
Peace of Mind
When this tax year comes around, don’t waste months stressing out and scrambling to collect the right documents. Instead, invest in professional tax prep for small businesses and gain some peace of mind.
You can rest assured knowing that your tax documents are in good hands with a professional. It can even reduce the risk of getting audited, which provides an added layer of protection for your small business.
2021 Tax Prep for Businesses
Don’t waste another year struggling to file your own tax documents. Contact Xendoo and take advantage of our reliable and affordable tax prep services. Our platform provides the latest online bookkeeping features, a user-friendly interface, and all of the tools you need to keep track of your financial information.