Tax season is a busy and exciting time of year, but when should you be filing your business taxes? When is the best time to file your business taxes and how can you prepare for tax time?
Even though filing business taxes can be tedious, it is something that every business owner must do to ensure their business stays in compliance with the IRS. If you don’t file your taxes on time, you can get a penalty and even put your business at risk.
To ensure you file your taxes properly and on time, consider these tips.
When is the best time to file your business taxes?
The short answer is that the best time to file your business taxes is when you’re ready. Being prepared and organized is the key to filing your business taxes as early as possible.
The Internal Revenue Service (IRS) recommends that you begin gathering information and documents for your business in January. By starting early, you can get ahead of the curve and enter this information into a tax preparation software program or give it to an accountant. When your taxes are complete, you can file them either by mail or electronically through the IRS website.
Filing by mail takes longer than filing electronically because, of course, the mail has to be delivered. If there are any issues with your return and it has to be sent back to you for clarification, that can cause a significant delay in getting your refund or paying any amount due.
Why it’s important to start early
The best time to file your business taxes is early. The sooner the better. That’s because having more time to prepare tends to mean less stress and less chance of error or missing deductions.
Most small businesses will want to file their taxes by the end of January if they want their refund as soon as possible. If you’re self-employed, your deadline is usually the 15th day of the fourth month after your tax year ends (April 15 for most people). However, if you have employees, you’ll need to file sooner — Form 941 for quarterly taxes is due by the last day of the month that follows each calendar quarter.
What you need to have before you file your taxes
You need to have the right documents and information before you file your taxes. This may include:
Your business’s tax return forms (different entities have different forms).
Your business’s financial data for the year, including income and expenses.
Schedule C
This is used by sole proprietors to report their income and expenses. It’s part of Form 1040, which is filed by individuals.
Schedule C-EZ
This is a simpler version of Schedule C that can be used by some sole proprietors with relatively simple businesses.
Form 1120S
This is for S corporations, which are defined by the IRS as “a special type of corporation created through an IRS tax election.” S corporations must file this form annually and send a copy to each shareholder (owner).
Form 1120
This is for all other types of corporations, including C corporations and limited liability companies that elect to be treated as C corps for tax purposes.
Conclusion
In general, the best time to file your taxes is when you have all your information together. The first thing you should do when deciding when to file your taxes is to determine which business tax return form you’ll be using, 1040, 1065, or 1120S. Hopefully, these tips have helped you make a more informed decision about when to file your taxes.
Contact our experts at Abbo Tax CPA in San Diego, CA if you need help with your business tax preparation!
