During tax season in America, there seems to be a never-ending list of tasks to complete to get you through filing your return. Being too organized is no such thing when tax authorities are involved. This is especially true for eCommerce owners in America. These steps will help you build a plan of action, giving you a jump start to filing your taxes well before they’re due.
To hit your deadlines, you must know them. Avoid expensive penalties by adding these dates to your calendar:
*Individuals who’ve had over 200 sales/transactions AND over $20,000 in sales with the same payment processor will also receive a 1099-K.
If there is any doubt you’ll be able to file your return by its original due date, file for the extension to give yourself (or your tax preparer) almost 6 additional months to gather all your paperwork and file.
Regardless if you file for the extension, you’ll be liable for paying any income tax owed by the original filing deadline. Fees start to accrue the day following your due date. Penalty fees vary from 5%-25% of your unpaid income taxes each month they’re late.
Going paperless is not only good for the environment, but receipts stored online also saves you the hassle of sorting through a hill of paper when tax season rolls around.
Keep your business spending separate from your personal. The IRS has a higher chance of flagging any disbursement of funds that don’t appear to be regular and necessary for your business. Comingling of a personal and business account is against tax law.
For a stress-free tax season, keeping your bookkeeping updated year-round is key. In case of an audit, your business’ income and expenses laid in a clear set of books provide protection. Plan ahead by closing your books at the end of every month/quarter/year. Bookkeeping can be processed by using online accounting software or a professional bookkeeper.
If your business is new, take counsel from an accounting professional as some of your expenses possibly fall under costs for starting-up. Maintain proper documentation for future deductions and tax credit claims. Unless otherwise noted, the following expenses can be deducted on Form 1040’s Schedule C.
Use this as a guideline to have a less stressful tax season and maximize your deductions. Keep tabs on your state’s sales tax requirements to avoid further worries. Monthly maintenance of your books, business records, and being cognizant of approaching deadlines will make your tax filing easy.