A necessary part of doing business and that entrepreneurs have to deal with on a regular basis are tax returns. Although small businesses are simpler than corporations, they still end up being confused about the first times they handle Tucson tax filing. When the month of April arrives stress levels immediately rise since owners have to search for all their receipts. To meet the tax filing deadline it is necessary to carefully fill each form and gather your receipts in case there will be an audit. Even if it’s your first time or the tenth, consider the following tips if you want to eliminate errors.
The first step any business owner has to take is obtaining an Employer Identification Number either online or from the Revenue Service. It is also important to keep a record of sales and expenses of the current year, this basically means that you should gather sales receipts, invoices or any other documents to prove to the authorities your company’s expenses and incomes. You can use these documents for possible deductions. Although many small businesses fear that taking home office deduction is a red flag for the IRS audit, you should take the deduction if you are entitled to it because it can save you thousands of dollars. Should you have a space in the home dedicated especially for the business, then you are eligible for the deduction.
When it comes to categorizing business equipment many owners make the mistake of classifying them as supplies. Business equipment means high-value items that lasts longer than one year, such as computers, software and office furniture. Equipment does not include printer ink or paper. Instead of taking depreciation over multiple years, you are actually able to write off the cost of the entire cost of new equipment for a year.
In case the documents you need to prepare for the return have never arrived or they simply can’t be located, then you are likely to face penalties, not to mention frustration and delay. But it is very common for someone to lose a vital document when they need to prepare a return. The truth is that everyone loses something at one point, but the IRS will not forgive this unfortunate mistake. Even if the return is not rejected, the lack of documentation makes your application unfilled. The penalties themselves vary according to the form and the missing information. The only solution to this problem is getting replacements.
Familiarize yourself with the forms
Determining the correct tax form is equally important as gathering receipts. All businesses are required to report their earnings to the IRS and pay contributions. However, the exact form depends on the business structure. While partnerships will report their losses and income on Form 1065, sole proprietors will report their business income on a Schedule C that is attached to the income tax return. The IRS may provide helpful tables so that you can break down the application for each type of business, it is advisable to get the help of a professional tax consultant.