Tax time is upon us and small businesses need to prepare. The average small business in the US pays a tax rate of 19.8%. Do you have that saved up and ready to spare?
Whether you do or you don’t, it’s time to get ready. If you’re a newer business owner, then it’s time to learn how. Let’s talk about how to prepare taxes for a small business in 2022!
How to Prepare Taxes for a Small Business
First, understand that small business tax preparation is completely different for small businesses. Small businesses like those in the retail industry can follow a systematic tax guide to ensure that tax returns are filed adequately.
Also, you can choose whether you want to pay your estimated tax bills quarterly (every three months) or annually (by mid-April). Other than that, here’s how to get started!
Throughout the year, keep diligent track of all business income and expenses. If you don’t, you could wind up overpaying on taxes or underpaying, which could come with legal consequences.
Consequently, it’s critical to develop a system early on to help you stay on top of your books. There are apps like Quickbooks Self-Employed that can track business mileage, allow you to upload pictures of receipts, and more.
Otherwise, go with a simple pen and paper, store your receipts, or keep a spreadsheet on your computer. Just make sure you’re keeping track as you go!
Understand the Forms
If you’ve never filed small business taxes before, it’s very different from filing as an employee, and you’ll need to understand the forms you file. If you earn more than $600 during the fiscal year from one source, then they will need to provide you with a 1099K form.
Then, you will need to add this as revenue and you will owe taxes based on this income. On top of this, you will need to file any form 1099-NEC or 1099-misc. If you have any confusion over 1099-NEC or if you’ve never filed one, then check out this article to learn more about who needs a 1099-NEC.
File With the Right Platform
Whether you’re using an accountant or online self-employment e-filer, choose what works for you. If it’s your first time filing small business taxes, make sure that any program you use offers insights into what you’re doing. Mistakes on these forms can be costly.
Otherwise, we would suggest using an accountant, as they’ll be able to offer expert advice on each part of the form and ensure you aren’t missing anything. It will eliminate the guessing game.
Now that you know how to prepare taxes for a small business, you don’t have much time until the tax deadline, so either get started or file an extension. Get prepared today and start developing better financial habits to prepare for next year!
File your taxes as soon as possible and keep reading our blog for our latest financial tips!