This post was originally published on March 27, 2015, and was updated on March 29, 2018 and March 29, 2021.
Spring has sprung. And with the COVID pandemic in its second year, I’d wager that spring is looking a little different for all of us this year. However, one thing is back to normal and that is the fact that income tax is due to the IRS on April 15, 2021.
What do I mean by back to normal? If you’ll recall, last year, due to the burgeoning pandemic, federal Income Tax Day and income tax filing day in most states was moved from April 15th to July 15th. This year, unless anything changes after this writing, the day your federal income tax return is due is back to its usual spot on April 15th.
As someone who has dealt with income tax as an employee and as a business owner, I’ll just come out and say that filing taxes as a business owner is much more challenging. As an employee, you get your W-2s in the mail, plug some numbers into tax form 1040, and you’re done.
As a sole proprietor or corporation, you not only have that notorious Form 1040 to contend with, you also have to deal with self-employment tax forms like Schedule C and Schedule SE, not to mention wrangling all the business-related deductions you can take. It’s no wonder that many of us put this trying task off until the last minute.
But if you’ve put off your taxes until now (and believe me, I’ve been there) here are a few tips for getting your income tax paperwork straight by April 15.
4 last-minute income tax tips
Gather up your income.
Calculate all your business expenses.
File for an income tax extension.
Let’s look at each tip in more detail.
1. Gather up your income
Determine how much you made in your business this year. For service providers, how much did your customers pay you? If they sent you form 1099-NEC, gather those up and check them against your own records.
For product sellers, how much did you gross in income from sales? Be sure to report every penny of income, or Uncle Sam might come calling. This includes everything you grossed, such as the shipping and handling that you charged your customers, and even any payments for products that you later refunded. But don’t worry, you can deduct all of those costs when we get to …
2. Calculate all your business expenses
Finding and documenting all of your business expenses is generally the biggest chore of all when it comes to filing income tax.
Uncle Sam requires that you document every expense, and that means making sure you have all of your receipts for every single paperclip.
Not to mention some of the most lucrative small business tax deductions are also some of the most complicated. The home office deduction requires compiling multiple expenses and calculating percentages (yikes!) and the auto expenses deduction requires extensive record keeping that you should start right at the beginning of the year. You don’t want to leave all these deductions on the table, but calculating them at the last minute can be a nightmarish experience!
But just as you should report all of your income so that Uncle Sam doesn’t come calling, you should also report all of your expenses so that you don’t pay out too much in taxes. Keep that money in your pocket to grow your business!
3. Get help
Are you staring at a big box of receipts and a stack of 1099-NEC forms? GoDaddy has your back. GoDaddy Online Bookkeeping will connect with your bank account, business credit cards and the eCommerce platforms you sell on. We’ll pull in your income and expenses, and even categorize them for you. At the end of the year, all you have to do is click over to the “Taxes” tab and we’ll present you with a tax return-ready Schedule C. Save hours on your taxes and stop tearing your hair out!
If you’re still confused about taxes even after signing up with GoDaddy Online Bookkeeping, you do have one more option …
4. File for an income tax extension
If you’ve tried your hardest and still can’t get your taxes ready by the April income tax deadline, you can play your “get out of jail free” card and file a tax extension. The IRS will grant taxpayers an extra six months to file taxes, and all you have to do is either file IRS form 4868 or use a service like FileLater to file online.
There’s one caveat, though. The tax extension gives you more time to file your taxes but not more time to pay your taxes. So you should still estimate how much you owe in taxes and make a payment. Once you’ve finished your calculations you’ll either pay Uncle Sam a little more (plus a small amount of interest and penalties) or get a refund.
No matter what happens, filing an extension is always better than simply filing your taxes late. Even the IRS itself says that the failure-to-file penalty is generally bigger than the failure-to-pay penalty.
Tax time isn’t anybody’s favorite time of year, but it doesn’t have to be painful. We hope these income tax tips have helped make your tax time just a little less taxing!
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
The post Last-minute income tax tips for small business owners appeared first on GoDaddy Blog.
Source: Go Daddy Garage