Plan Ahead is the Key for Being Ready for Tax Filing

Know the essential things to prepare before filing taxes and avoid unwanted scenarios. 

All of us are legally required to pay taxes, therefore, it’s up to each of us to understand the process of filing taxes. From knowing the right documents and forms to use to knowing when they need to be filed or when payments are due will help you pay your taxes correctly — and not overpay or pay to little when the time comes. 

First, identify what type of entity you are. Secondly, know when your deadlines are due. Then, you will quickly understand what you must prepare only and give what is needed. 

Reading the tips and guides below will educate you to know the correct forms you need to accomplish and the information you only need to provide for each tax entity. 

The essential things you need to know to avoid penalties and conflicts.

You may have missed some critical tips and preparation from business last year, but keep reading and we will break down the essentials to help you avoid getting penalties and conflicts in the future.

1. What do you need to prepare as a self-employed entity? 

A self-employed entity needs to prepare the following: 

• A list of all your income and expenses. This record will show your profit and loss expenses. 
• These include gross receipts, sales records, returns and allowances, and business checking or savings account interest. 
• Have a list of your inventory, inventory purchases, items removed for personal purposes, and other materials and supplies
• Prepare all 1099-NEC forms.
• Capture all your business expenses, like transportation, commissions, contract labor expenses, depreciation of assets, amortization of intangible assets, business insurance, interest expense, professional fees, rent expense, wages, benefits, and other expenses. 

Other tips for small business owners: 

• Keep pictures of your receipts 
• By January 15, pay your estimated taxes
• By January 31, file and send your 1099-NEC
• By January 31, issue a W-2 and file your payroll reports (Form 940 and 941) 
• File Form 1096
• Take advantage of all the deductions (mileage, travel, internet, phones, home office, advertising)
• Reconcile income and expenses, like your bank account. 
• Do your documentation in case the IRS audits you.  

2. What will you prepare if your entity is a partnership? 

You will use Form 1065. There are fewer requirements and documents if you are filing taxes under partnerships which are: 

• A copy of the partnership agreement with any bylaws and amendments
• The list of federal and state tax EINS or employer identification numbers
• The old 1065 Form from last year and the schedules K-1 and any state
• The forms for individuals in partnerships are also needed, such as form 965-A or Form 2040
• These forms would ask for information regarding capital contributions, distributions, and other transactions involving a partner.
• The individuals in the partnership will also share liabilities, payments made, insurance plans, liquidating costs, or any change in ownership percentages, including the addition or loss of partners.  

Other information: 

Filing dates should be by March 15

3. What if you are under the C- Corporations entity when filing taxes? 

C corporations are separate entities and report their income to claim deductions and credits annually.

The things needed for tax filing are: 

• The documents of articles and incorporation bylaws.
• Form 8832 if the s-corporations chose to be taxed using check-the-box regulations.
• A list of federal and state employer identification numbers or EINs 
• Last year’s Form 1120 
• Any information regarding any dividends
• Corporation’s accumulated earnings
• Information about any business reorganization or changes during the year
• Shareholder’s information that owns 20% of the stock or higher 

Other reminders: 

Corporations with assets amounting to $10 million or more must file Forms 1120 and 1120s electronically on or after December 31. 

4. What are the documents and other requirements for S Corporations? 

If you are filing under for the 1120S, there are several documents and shareholder information required, such as:

• Documents of IRS acceptance letter of S election or Form 2553 previously filed.
• A copy of the business’ bylaws and articles of incorporation 
• A list of federal and state employer identification numbers or EINs 
• Any information carried over after converting I previously, the S-Corporation was a C-Corporation.
• The old 1120s, Schedules K-1, and any local or state returns
• Various news of the shareholders, such as names, addresses, SSN/EIN, and the number of shares for each

Other important details: 

• Information about the S-corporations’ capital contributions, loans, reasonable compensation, insurance, or any changes in ownership throughout the year is also requested. 
• S- corporations have an additional filing due by March 15. 

General Tips and Guidelines to be Tax Ready

Below is a list of general information to ensure a smoother tax filing.

1. Make a list of the things you need after knowing your entity. 
2. Download or collect those forms and place them in a folder on your laptop or in your file drawer. 
3. Mark your calendar for the due dates.
4. Hire an accountant that will help you understand and explain precisely every step of paying taxes. 

Preparing for tax filing can be a daunting task, but with proper planning and organization, it can be made less stressful. It is important to gather all necessary documents, understand the tax laws and deductions that apply to your situation, and seek professional assistance if needed.

By following these tips and staying on top of deadlines, you can ensure that your tax filing process goes smoothly, and you get the maximum refund you are entitled to.