Tax season is just around the corner! To help you prepare, we have put together a guide on some key compliances you won’t want to forget as you get ready to file.
Preparation is key to prevent major tax mix-ups. First things first, collect all your necessary documentation so you are ready to file. By doing this ahead of time, you are also giving yourself extra time to address any last-minute tax needs like a single missing document.
Some common documentation for your business you will need to have to file are:
- Tax returns from prior years
- SSN info for you and partners
- EIN Number
- Payroll records
- Income records
- Charitable donation or gift records
- Property Tax receipts
- Receipts of quarterly estimated tax payments
- Expenses to be deducted
- When including your business costs, don’t forget some of these common deductions:
- Inventory Costs
- Pension Plans and Profit Sharing
- Auto Maintenance and Mileage
- Utilities (Water, electric, trash and telephone bills)
- Office Expenses, Equipment (Insurance, rent, security, equipment, software)
- Education Expenses
- Tips and Petty Cash (Small cash expenses not accounted for via receipts)
- Marketing
- Write-offs, or Depreciation
- Contractor Expenses
- Bad Debt (If previously included in income, bad debt may be deductible)
- Professional Fees (Attorney, accountant, insurance premiums and other professional fees)
- Maintenance and Repairs
- Licenses
Once you have collected your necessary documents, you can get down to brass tax (no pun intended) of filing for the year.
The first thing you will want to start with on this journey is knowing exactly how your company is categorized. If you are an S-Corp, you will have a totally different set of forms to fill out than if you were an LLC. If you are unsure, check back on last year’s tax return or your formation documents for the company to find out.
Now that you know which packet of paperwork to fill out, you can start the actual filing process. From here, the forms should be self-explanatory, but you may need to watch for particular items depending on your actual business. For the purposes of this article, we are going to cover just a few industries so you can understand how complex some of this can become. Don’t worry: You know your industry well, so reporting these extra items on your taxes will be a piece of cake.
- The trucking industry keeps America running with goods being shipped in a constant stream from coast to coast. Trucking companies ultimately pay taxes to help maintain these well-traveled roadways. This is often referred to as a liability tax. In addition, they are likely to pay an excise tax on fuel.
As well, trucking companies have to collect the documents we discussed before, along with each of their vehicle’s ID numbers and the taxable gross weight on each vehicle.
- Manufacturing companies face a very interesting set of challenges when they either receive or ship goods across state lines. This becomes even more complicated if their supply chain reaches outside our national borders. This particular industry has to ensure they are compliant on paying their home state taxes as well as any applicable taxes on goods being bought or sold to other states. The same goes for materials that touch international lands. All of these needs to be solidly documented to show the company is paying each entity involved its fair share.
- Cities, townships or county governments — despite being government entities — have to pay taxes too. Their tax compliance most often hinges on precise records of spending. These records help keep questions from coming up later on exact spending and taxable purchases made by the governing body.
- Construction companies are sometimes subject to sales tax depending on the state. By this, we mean sometimes they are considered an entity offering a service, while other times, they are selling a finished product to a client. This difference changes what you ultimately will need to charge the customer and your possible bids for a project, especially if it is for a job that is not within a state you are familiar with. All this adds up to major differences in tax filing at the end of the year, so it is important you keep up with the taxes you have paid for each job during the year.
- The oil industry has to be very careful when it comes to environmental taxes. This can include local, state and federal regulations depending on the location of the business. Given the nature of drilling, there are often various degrees of property taxes that need to be paid.
- One final example, staffing, has to keep a close eye on payroll taxes. Not only do they need to be sure they pay the company taxes, but that they track employee tax deductions properly too. They also need to be sure they provide W2s to each employee before the end of January each year to be compliant in this area.
Again, some of these industry-specific requirements may come as no surprise to you, while others may seem dizzying. When in doubt, it may be best to consult a tax accountant who specializes in tax code for your industry. This is especially true for businesses most often affected by governmental changes, such as environmental issues with oil.
A professional tax accountant can help either maximize your return or minimize your tax bill but above all, make sure you are compliant when filing. While a tax accountant can be pricey and seem like additional steps in this arduous process, it may ultimately make your life easier. This can be especially helpful in your start-up year or if you are selling your business. Not only will they help keep you compliant but they will be able to walk you through each piece of the process as it relates to your business.
One final item to note as it relates to taxes and compliance is looking for eligible tax credits. These change quite often in tax code and can save your company bundles of money. Just as there are varying regulations for each business, so too is there a library of tax credits that you may be eligible to receive. Some of the crazier ones are:
- Guard dog or mouser cat
- Reforestation Efforts
- Research Activities (including building software, developing a patent or building a prototype)
- Alternative Fuel Motor Vehicle
- Employer-Provided Daycare
These are just some of the very niche credits that exist, but there are so many more that can help your company save at tax time. As discussed before, it is important to double-check your eligibility or consult with a tax professional before claiming the credits willy nilly. As you can imagine, there are some heavy repercussions if you file these credits incorrectly.
You are all set, now just wait for any returns you may receive and when you do try to have a plan in place for what this money will be used for so you don’t squander it.
Related: The Smart Way to Use Your Tax Refund