Preparing for Tax Season: A Checklist for Small Businesses

Dall·e 2024 02 01 (2)

Tax season can be a challenging time for small business owners. Staying organized and understanding the key steps can make the process smoother and more efficient. Here’s a checklist to help you prepare for the 2024 tax season.

1. Understand Different Types of Business Taxes

I know that around this time of year, most businesses are focused on preparing for annual income tax filing, but it’s important to know the various taxes your business may be responsible for, such as income taxes, estimated taxes, self-employment taxes, and employment taxes. The type and amount of tax will depend on your business structure, whether it’s a sole proprietorship, partnership, S corporation, or C corporation​​.

2. Know Your Tax Forms

Depending on your business structure, you’ll need specific forms to report profits, losses, deductions, and credits. For example, sole proprietors use Schedule C, C Corporations file Form 1120, Partnerships use Form 1065, and S Corporations file Form 1120S​​.

3. Organize Your Records

Start by gathering all necessary documents such as income statements, expense receipts, payroll records, bank statements, mileage records, loan and purchase agreements, and estimated tax payments. This step is crucial to avoid potential errors and assess the financial health of your business​​. In addition to the normal business records listed above, it’s important that you also provide your accountants with any tax forms you might receive from other businesses, such as:

  • Form W-2: Wage & Tax Statement – if you are traditionally employed whether through your own business or with another, you should receive a form detailing what you’ve been paid for the year.
  • Form 1099-MISC or 1099-NEC: Miscellaneous Income – usually received from businesses that you’ve subcontracted with, or done gig-work for.
  • Form 1099-G: Certain Government Payments – if you filed for and received unemployment benefits, taxable grants, or state/local tax refunds.
  • Form 1099-K: Payment Card & Third-Party Network Transactions – normally received from the merchant who processes your customer payments and deposits
  • Form 1099-DIV: Dividends & Distributions – normally received from any stock or investment portfolio managers

4. Analyze Your Financial Statements

Review your financial statements thoroughly to ensure accuracy. Use tools like QuickBooks to organize your business transactions and calculate your income and expenses​​. If you’re not currently tracking your revenues and expenses, we highly encourage you to start! Not only are up-to-date books useful for annual tax filing, but they are also an excellent source when making plans for business growth. We can help you set up a chart of accounts, and get your financial accounts connected as part of our Quickbooks Online setup and conversion services.

5. List Your Tax Deductions and Credits

Identify potential deductions and credits to reduce your tax liability. Common deductions include home office expenses, vehicle expenses, salaries and wages, rent or lease payments, depreciation, professional fees, and interest. Credits can include the Work Opportunity Tax Credit, Small Business Health Care Tax Credit, R&D Tax Credit, and others​​. Maintain clear separation of business and personal finances to simplify tax calculations and avoid confusion​.

6. Create a Tax Calendar

Keep track of all the important tax dates for 2024, including quarterly estimated tax payments and filing deadlines for different business structures. For instance, the deadline for partnerships, S corporations, and multi-member LLCs is March 15, 2024, while single-member LLCs, sole proprietors, and C corporations must file by April 18, 2024​​​​.

7. Consult a Professional

We’re probably a little biased, but we believe that there are some small businesses who REQUIRE professional bookkeeping and tax planning in order to stay competitive and to make sure they are taking advantage of available tax deductions and credits. Consider hiring a tax professional to guide you through the process, especially if you’re unclear about certain aspects of tax filing. They can provide valuable insights, help maximize deductions and credits, and ensure compliance with tax laws​​. And if your books aren’t quite in shape yet, we invite you to reach out – Berryhill Consulting provides one-time tax preparation services to make sure your books are up to date and ready for tax filing. Contact us for more information on current discounts and promotions!

New Tax Laws in 2024: What Small Businesses Should Know

Dall·e 2024 01 19

The year 2024 brings with it a new set of tax laws and regulations that could significantly impact small businesses. Staying informed and understanding these changes is crucial for effective financial planning and compliance.

1. Overview of 2024 Tax Changes

The 2024 tax law revisions include adjustments in tax rates, deductions, and credits that are particularly relevant to small businesses. These changes are designed to streamline tax processes and provide more clarity for business owners.

2. Key Changes Affecting Small Businesses

  • Revised Tax Brackets: There may be changes in the tax brackets, which could alter the amount of tax your business is liable to pay.
  • Increased Deductions: Look out for increased thresholds in standard deductions, which can reduce taxable income. For married couples filing jointly, the deduction will be $29,200, up by $1,500 from 2023. Single taxpayers and those married but filing separately will see their standard deduction rise to $14,600, an increase of $750. Heads of households will have a deduction of $21,900, up by $1,100​​.
  • Alterations in Tax Credits: Certain tax credits that benefit small businesses might have been revised or extended. The AMT exemption for 2024 is set at $85,700, phasing out at higher income levels. The maximum EITC amount is increased for taxpayers with three or more qualifying children.

3. Understanding Deductions and Credits

It’s vital to understand the deductions and credits available to your business. For example, new laws might offer incentives for environmentally-friendly practices or technology upgrades.

4. Importance of Accurate Financial Records

Accurate financial records are more important than ever. They ensure you can take full advantage of deductions and credits while maintaining compliance with the new laws.

5. Seeking Professional Advice

Tax laws can be complex, and their application may vary based on specific business circumstances. It’s advisable to consult with a tax professional to understand how these changes directly impact your business. BHC does not provide tax filing services, but we can connect you with a pro that does, and can help you with tax planning.

6. Planning for the Future

Use this opportunity to review and adjust your business’s financial planning strategies. Effective tax planning can lead to significant savings and help in the long-term growth of your business.

Conclusion

The new tax laws in 2024 present both challenges and opportunities for small businesses. By staying informed and proactively adapting to these changes, businesses can position themselves for continued success and growth.

IRS Navigation – Personal Income Tax

Many of you may be aware (or experiencing!) the unprecedented snarl that the IRS is in lately. There have been MANY tax changes relating to the COVID-19 crisis, and juggling all of these changes plus working to get various stimulus payments out the door has caused an enormous backlog of unprocessed tax returns and refunds to stack up. The current estimated wait time for getting your return processed is 20 weeks from the date you filed. (Compared to 21 DAYS that was the norm.) Before I get too far, I want to warn you that I don’t have any magical cures for getting your refund to you. The fact is, the IRS is simply very very behind in processing returns. And their telephone helplines are a maze of automated “Select 1 for a frontal lobotomy, Select 2 for information on how to order a stress ball for the amount of pain we are currently causing you.” But I did think this would be a good time to mention some tools that the IRS has in place that might help you check on the status of your account with the IRS, without having to wait on hold for hours to talk to an actual agent.

Where’s My Refund Tool

This one has been well covered in the media if you know what you’re looking for, but I did want to mention it just in case. Located here, the refund tool allows you to check receipt of your IRS return, as well as “status.” And by status, I mean the most generic, not-so-helpful status available. 🙂 What this tool CAN do for you is verify that your return has been officially received and accepted. It can also let you know when your refund, if you have one, has been issued and sent. What it DOESN’T do a good job of doing is letting you know exactly what kind of “processing” or “reviewing” your return is undergoing. And unfortunately for this tax year, these two statuses are where a lot of returns spend the most time.

Request a Transcript

If you want a little more information on what’s going on, you can try requesting a copy of your transcript here. There are a few different types of transcripts available, and the IRS provides a list of these types with descriptions here. These transcripts (for the most part) are free to request. They are a good way to check on the information being submitted for you, either on your behalf (by employers, lenders, etc), or that you or your accountant submitted yourself. For example, an employer is required to submit a copy of your W2 (for employees) or 1099 (for contractors) to the IRS as well as provide you with a copy. If you’ve maybe lost your copy, or would like to double check that the information is accurate, you can do this here. This is also a good way to check and see whether the IRS has sent you any notices that you might need to respond to. For example, a late-change in the tax law for 2021 adjusted how unemployment credits are calculated. For some taxpayers who had already submitted their Form 1040, the IRS was required to recalculate a return. For any returns impacted, they mailed a paper notice out. This notice was informational only, and (usually) required no response. However, sometimes the IRS DOES need a response from you on these notices, and it’s possible that the notice got lost in the mail or delivered to a different address. So it may be a good idea to check and see whether your Account Transcript shows that a notice was sent, so you can compare it with the notices you actually received.

View Your Account

I personally ran into this issue recently. Like I mentioned above, my Account Transcript showed I was mailed a letter from the IRS back in October. I never saw this letter, whether it was due to me not receiving it, or whether a family member mistook it for junk mail and threw it away, the result was that I had no idea what it said, and whether I needed to take action on it! Well, in some cases, you can retrieve a copy of these notices by opening them from your account dashboard. Located here, you can sign up to receive an email every time a notice is uploaded to this portal. Fair warning, it’s been my experience that there are delays with things getting uploaded here too. However, you can also view information on past tax year balances, make payments on balances due, or sign up for a tax payment plan.