Business tax prep made easy: Your key to a smooth tax season

Our best practice guide helps you get your finances in order and avoid tax season stress.

An important time of the year approaches for American business owners: tax season. While it might not be as fun as Halloween or as hot as 4th of July, you’ll find that being prepared will help you experience a smooth and stress-free process.

At Swoop, we understand the demands on your time and resources, and we’re here to offer guidance to help you navigate the upcoming tax season with confidence.

This blog post will highlight key areas to focus on and provide actionable tips to ensure you’re equipped for success.

Understand tax deadlines: mark your calendar!

Missing tax deadlines can lead to penalties and unnecessary stress. It’s vital to be aware of the crucial dates for your business. Here’s a general overview (always refer to the official IRS website for the most up-to-date information):

• Sole Proprietorships: Typically file Schedule C with their personal income tax return (Form 1040), with a general deadline of April 15th.
• Partnerships: File Form 1065, with a deadline of March 15th. Partners then report their share of income and deductions on their individual returns by April 15th.
• Limited Liability Companies (LLCs): Filing deadlines depend on how the LLC is classified (as a sole proprietorship, partnership, or corporation).
• S Corporations: File Form 1120-S by March 15th. Shareholders then report their share of income and losses on their individual returns by April 15th.
• C Corporations: File Form 1120 generally by the 15th day of the 4th month after the end of their tax year.

Bookmark this helpful resource from TurboTax for a quick reference on important tax deadlines and dates.

Proper record keeping is the foundation of finances

With the many moving parts of the tax system, careful record-keeping is the cornerstone of a successful tax season. When you maintain accurate and organized records throughout the year, you’ll reap the rewards of saved significant time, fewer errors, and confidence in deductions and credits. This includes:

• Invoices and payments: Be sure to maintain copies of all invoices issued and payments received
• Expense receipts: Keep meticulous records of all eligible business expenses. Digital tools and apps can be incredibly helpful for organizing these.
• Bank transactions: Regularly reconcile your bank transactions to ensure everything is accurate.
• Loan and credit statements: Keep records of any business loans or credit lines, including repayment schedules and interest expenses.
• Payroll records: Keep accurate records of employee wages, taxes withheld, and benefits, which are essential for both tax filings and compliance.
• Asset records: Maintain records of any business assets purchased, including their cost and date of acquisition.

Consistent record-keeping not only simplifies tax preparation but also provides valuable insights into your business’s financial performance.

Maximize your savings with tax deductions and credits

The U.S. tax code offers various deductions and credits designed to support businesses of all sizes. When you understand and claim these, you can significantly lower your tax burden:

• Home office deduction: If you regularly and exclusively use a portion of your home for business, you may be eligible to deduct related expenses.
• Section 179 deduction: This allows businesses to deduct the full purchase price of qualifying new or used equipment placed in service during the tax year, rather than depreciating it over time.
• Research & Development (R&D) Tax Credit: If your business invests in qualified research and development activities, you may be eligible for a valuable R&D tax credit. This credit can be complex to claim, but the potential tax savings can be substantial. Navigating the R&D tax credit requirements can be intricate. The experts at Swoop can help you assess your R&D tax credit eligibility and maximize your claim. 
• Qualified Business Income (QBI) Deduction: This deduction allows eligible self-employed taxpayers and small business owners to deduct up to 20% of their qualified business income.

It’s essential to research the specific deductions and credits applicable to your industry, business structure, and activities.

Common mistakes to avoid

Even with the best intentions, business owners can sometimes stumble during tax season. Be mindful of these common mistakes:

• Missing deadlines: As mentioned earlier, this can result in penalties.
• Failing to track expenses properly: Incomplete or disorganized expense records can lead to missed deductions.
• Overlooking eligible tax credits: Make sure you’re aware of all the credits your business might qualify for.
• Incorrectly classifying expenses: Understanding the difference between capital expenses and operating expenses is crucial.
• Inadequate supporting documentation: Ensure you have receipts and documentation to support all claimed deductions and credits.
• Keep business and personal finances separate: Maintain separate bank accounts and records for your business to ensure accurate tax reporting.

When you need expert advice, hire a professional

For many small and medium-sized business owners, partnering with a qualified accountant or tax professional is a strategic investment. They can provide invaluable expertise in navigating the complexities of the U.S. tax code, ensuring compliance, and identifying all applicable deductions and credits. Consider seeking professional assistance if:

• Your business has a complex structure or numerous transactions.
• You’re unsure about specific tax regulations or recent changes.
• You want to ensure you’re maximizing all potential tax benefits and minimizing your tax liability.
• You simply lack the time or in-depth knowledge to confidently handle tax preparation yourself.

Take a year round approach to tax planning 

Tax planning shouldn’t be a once-a-year event. Implementing proactive tax strategies throughout the year can help you avoid surprises and optimize your tax situation. Consider these ongoing practices:

• Make estimated tax payments (if required): If you expect to owe at least $1,000 in taxes for the year, you’ll generally need to make quarterly estimated tax payments to avoid penalties.
• Regularly review your financial performance: Monitor your income and expenses to identify potential tax planning opportunities.
• Consider tax-efficient business structures: Evaluate if your current business structure (sole proprietorship, LLC, S Corp, etc.) is the most advantageous from a tax perspective.
• Stay informed about tax law changes: The tax landscape is constantly evolving, so stay updated on any new legislation or IRS guidance.

How Swoop can help you prepare for the tax season 

As you approach the tax season, it’s a great time to take a close look at your business’s financial health. Are you anticipating a significant tax payment? Do you need to invest in equipment or resources to optimize your operations for the coming year.

At Swoop, we know that managing cash flow is crucial, especially during tax season. If you foresee a need for additional capital to cover tax obligations or pursue growth opportunities, explore your funding options with Swoop. We can help you access a variety of financing solutions, from short-term working capital to term loans, providing you with the financial flexibility you need to navigate tax season and invest in your future success.

To make things even easier, you can integrate your accounting software with Swoop to unlock valuable insights and track the health of your business in real-time. This integration helps you stay on top of your financials, identify areas for improvement, and make more informed decisions as you navigate tax season and beyond.

Don’t let tax season be a source of stress. When you understand key deadlines, maintain proper records, explore available benefits and plan proactively, you can approach this time with confidence. And remember, Swoop is here to support your financial journey every step of the way.