By financen | November 8, 2019 - 3:42 am - Posted in Business, Tax

Most small businesses wait until the last day to ready their books for the tax season. Getting an early start, whether you do it yourself or use tax companies, will reduce your tax burden and minimize the struggles you go through at the end of the year. It could even increase your tax deductions. Here are three tips on preparing your business for the tax season.

Update Employee and Independent Contractor Details

Do not wait for the end of the year to collect your employee and contractor details. If your business works with independent contractors and not employees, you will be required to submit 1099 form – this is a form that reports any payments over $600 made to contractors. Before submitting the details, call contractors to ensure you have up-to-date information.

If you do not have a W-9 form on file, submit one to the contractors and ask for contact details and business tax identification number. By January 31, every employee should receive a W-2 form to ensure you have the correct contact details.

Maximize Deductions

As the end of year approaches, you need to take advantage of tax deductions to pay as little tax as possible. To start with, buy new office equipment or furniture towards the tax season to qualify for tax deductions. You can also contribute in-cash or in-kind to a charitable organization. Instead of disposing of your old equipment and furniture, give them to a qualifying charitable organization, and you could reduce your tax burden by a large percentage.

Another way to reduce your tax burden is to give end-year bonuses to your employees before December. Bonuses given before the start of the tax period qualify your business for tax deductions. Still on employees, and end year party (that is limited to all employees and not you and your family) may qualify for up to 100 percent tax deductions as established by IRS.

Gather All Documents in Time

Receipts, invoices, and any other documents needed to file your tax returns must be ready by the start of the tax period. Organize all your tax documents in an easy-to-access folder. Keep in mind that some of the materials need to be prepared way ahead of time. 

This entry was posted on Friday, November 8th, 2019 at 3:42 am and is filed under Business, Tax. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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