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U nder normal circumstances, most businesses would be in the process of closing out their books for 2019 and working their way through a 2019 tax preparation checklist. However, 2020 has brought on some unique challenges due to the COVID-19 virus, which has compelled the IRS to extend the tax filing deadline by three months to July 15, 2020. This gives small business owners more time to prepare—here's how you can make sure you have all your tax requirements in order.
In these difficult times, many businesses small and large will either suspend their operations and close their doors, or allow their employees to work from home. The circumstances are unprecedented.
Governments around the world are working hard to control the spread of this disease and meet the challenges of a badly damaged world economy. Your business, like countless others, will be affected by the decisions that federal, state and city governments will make in the coming days, weeks and perhaps even months.
Make sure to stay updated by checking the latest news from the federal government in response to COVID-19 , as well state-specific updates wherever you operate your business. The implications of these decisions will ripple across every company and household and will affect your payroll, inventory, expenditures and everything else that touches your business.
There is also the very real health risk caused by COVID-19, which is why the government has taken such great steps to assist American businesses.
On March 20, 2020, the Treasury Department announced the extended deadline to file your taxes from April 15 to July 15. The extension is automatic and applies to individuals, couples filing jointly, LLCs , trusts, estates, nonprofits , companies, S Corps and partnerships. If you need even more time to file your taxes, you can file for an extension (Form 4868 ), which will give you until October 15.
In addition to the extended tax deadline, and in response to the damage caused to business due to the virus, the government is planning on making available a number of resources and loans to small businesses, including low-interest loans. For more information, as well as the latest updates, go to SBA’s Economic Injury Disaster Loans .
The extended tax deadline will help you close out 2019, giving you time to navigate through the challenges of the current business environment. As you press ahead with your business tax documentation, here's a tax preparation checklist to help you get things in order.
To make sure you file your taxes correctly and aren’t overpaying, your books need to be accurate and up to date. If you’re going the do-it-yourself route, look over your transactions and books.
Not properly categorizing your business transactions means that tax-deductible expenses might go overlooked. In turn, you might end up paying more in taxes. What’s more, having unorganized bookkeeping could mean more headache and time and money wasted when it’s time to file your taxes.
If you’re handling your books on your own, allow your accountant to have access to all your software after you close them, suggests Logan Allec, CPA and founder of Money Done Right . “This will eliminate a lot of back-and-forth questioning that will arise if you simply send him an Excel sheet of your annual profit and loss, statement balance sheet and trial balance.”
Signs of a good accountant includes making sure they report everything correctly on your tax return. Oftentimes this means digging into the details and the supporting documents found in your bookkeeping software.
Take screenshots of payment confirmations for all estimated tax payments made during the year and send them to your accountant, along with your other tax documents, recommends Allec. “As a CPA, I want proof that my clients actually made the estimated tax payments during the year that I told them to make before reporting them on the tax return,” says Allen.
If you hired independent contractors in the past year, you’ll want to get your 1099 forms prepared. Per the IRS , if you’ve paid a freelancer at least $600 in 2019, you’ll need to file a 1099 for each person. Forms need to go to both the IRS and to your independent contractors. The deadline to submit these 1099 forms was January 31, 2020, but consult with your tax preparer and the IRS website for updates and recent developments.
While your accountant can most likely pull from your credit card or bank transactions, you’ll want to keep those receipts organized and handy. Besides providing proof of purchase, you might need them in the rare case that your business is subject to an audit.
Throughout the year, large and small businesses have made a number of decisions to help with their taxes. Make sure to take advantage of tax deductions and write-offs that can include:
If your business has W-2 employees and you are handling payroll through a payroll platform, it might be a good idea to have your accountant take a second look, recommends Allec. “One common mistake is S Corporation employees who own 2% or more of the S Corporation not reporting on their W-2 health insurance premiums paid by the S Corporation on their behalf.”
There might be other mistakes you’ve made as well, and an accountant can help sort it out.
There is a lot going on in today’s world. COVID-19 has upended many businesses and industries. Make sure to dedicate a block of time to get your 2019 tax prep in order, and if necessary, take advantage of the filing extension. Otherwise, you might find yourself with more loose ends to tie.
Also make a plan for your business for 2020 by conducting a risk assessment and revising your business plans to meet the recent changes to the economic and business landscape. Keep an eye on all the government programs that will help small businesses deal with COVID-19 fallout, such as the SBA Economic Injury Disaster Loans, as well as state- and city-specific programs, which could include emergency loans, grants and other packages that will help your business and employees.
During this hectic time, it is important to stay informed of announcements made by the IRS or of aid packages available from the government. Also use your time to streamline your tax prep, and keep this tax return checklist handy.
If you would like help with your business accounting , Bizee can assist. Our team of tax experts can help guide you as you file your 2019 annual tax returns and start planning for 2020.
Related Read: 8 Tax Saving Hacks Small Business Owners Often Miss.
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