Preparing and Filing Your Business Taxes

Save time and lower your taxes with organized records and the proper forms

By Irwin Speizer, Freelance Writer

There's no such thing as a convenient tax deadline. But with proper preparation and an understanding of the requirements, the chore can be a little less taxing on your time. Keeping good records is key, but it's also important to know what records you need and what forms you must complete. Understanding what it takes to prepare and file your business taxes can:

Save you time and effort.
Help you get all available deductions and credits.
Make sure you meet tax-filing deadlines.
Help you complete the proper tax forms.
Avoid late filing fees and penalties.

Gather your financial information

Before you begin figuring out what you owe in business taxes, you need to know what you make and what you spend in your business. That means sorting through your business income and expenses. You should gather these records and have them ready to use in preparing your taxes.
Try: Use this list of What Records to Keep as an overview of the receipts, documents and records you'll need. For a complete discussion of record keeping and business taxes, see this IRS report, Starting a Business and Keeping Records.

Check your business deductions

Overlooking business deductions is like giving the tax man a gift. While you don't want to be so aggressive about your deductions that you trigger an audit, you can still save on taxes by maximizing your allowable deductions and credits. You'll need to have good backup documentation on all your deductions, so make sure you have the proper receipts or other paperwork to back up any claims you make.
Try: Get a general overview of small business tax deductions or peruse a detailed look at business expenses from the IRS. Then review this list of small-businesses deductions you don't want to miss.

Know your filing status

Different types of businesses pay different taxes. Your taxes and reporting depend on if you run a sole proprietorship, partnership, limited liability company (LLC), or corporation. Whatever your status, you'll likely need an employer identification number (EIN) for your business.
Try: Apply online for an EIN. Discover the tax requirements of various business structures at Business Owner's Toolkit.

Get the forms you need

Once you have your financial records in order and know your filing status, the next step is to get the necessary forms. The list of forms you need may be extensive. In most cases, the number of required forms rises along with the number of deductions you claim. It's a tedious task but easily worth the effort in tax savings.
Try: Download many of the standard forms needed to complete your federal taxes at the IRS Forms and Publications page, where you can also view instructions for filling out the forms. Find state tax forms by clicking on your state at TaxAdmin.org.

Figure out what you owe

The next step is the one most business owners dread: actually filling out the tax forms and doing the calculations needed to figure out what you owe. No wonder most business owners turn the process over to accountants or tax preparers. The other option is to use tax software that comes with most of the necessary forms and automatic calculators to figure your taxes.
Try: If you decide to use software, there are numerous titles from which to choose, including TurboTax, TaxCut or TaxAct. Popular accounting software systems include NetSuite, QuickBooks, Microsoft Small Business Accounting, Simply Accounting, and MYOB.

File your taxes

Once you've completed the forms, you'll need to file them with the government. You can mail your completed forms or file your taxes electronically. Depending on your business type, your filing deadline may be different from the standard April 15 date.
Try: See the Where to File page on the IRS site for a list of filing locations if you choose to mail your completed form, or the E-file page for instructions if you choose to file electronically. State taxes e-filing is available in most states and can be accessed via TaxAdmin.org.

Be aware of your deadlines: Missing a filing deadline can result costly penalties. There are options that allow you to file late. If you know you're going to miss a deadline, ask for an extension.
Keep good business expense records: Tracking your business expenses throughout the year makes it much easier to collect them at tax time. A good financial software package can keep running totals of expenses by type and amount.
Save accounting fees: Some tax work is more difficult than others, but you can do your part to simplify things by having your financial records collected and organized. That could reduce the amount of time your accountant needs, which could also save you money in accounting charges.
Keep a record of your filing: If you mail your filing, it's a good idea to use certified mail so you have a record of when you sent your return and when it arrived at its destination. E-file uses a separate certification process.