Tax Season
Tax season for the 2021 tax year is right around the corner!
As tax professionals prepare for the upcoming tax season, YOU, the business owner, should also be preparing. If you work with a CPA which handles your business tax returns, hopefully, you’ve been in contact with them prior to the start of 2022.
It’s a good idea in the fourth quarter to touch base with your CPA to make sure your business is tracking consistently with prior years, to update your CPA on any significant changes which may impact your tax liability, to ensure you have remitted any applicable quarterly tax payments which may be due and payable, to get updates on any changes to federal, state and/or local tax laws/regulations which may materially affect your tax liability and so forth.
As we approach the start of the busy tax season, be sure to reach out to your CPA (or other tax professional or tax preparer) to make sure you know what financials your CPA (or other tax professional or tax preparer) may require to prepare your tax returns. From year to year, this shouldn’t change too much unless there have been material changes to your business but it’s a good idea to make sure both you and your CPA (or other tax professional or tax preparer) are on the same page.
Typical financials may include your year-end balance sheet, income statement (P&L), bank reconciliation & year-end bank statement and GL detail information (if requested or required), just to name a few. If you are working with a new CPA (or other tax professional or tax preparer), they may also require copies of your prior year returns and other relevant documents and information pertaining to your business. Also, be sure you provide the correct type of financials - cash or accrual basis – depending on how you report for tax purposes.
Get your business financials and other relevant documents over to your CPA (or other tax professional or tax preparer) as soon as possible so they have adequate time to review, ask questions or request clarification on any items and subsequently prepare and e-file your tax returns. Keep in mind, LLCs taxed as Partnerships, LLCs taxed as a sub-chapter S and S-Corps need to issue Schedule K-1s to members and shareholders; respectively, so they may prepare and file their personal tax returns. Any delay with the business tax returns will delay LLC members and S-Corp shareholders with their personal tax returns.
If 2022 is your first year in business (or first tax year with business income & expenses), you may not need to file a business tax return (or Schedule C on your personal return for sole proprietors and single-member LLCs with default tax treatment) for the 2021 tax year (consult with your tax professional); however, seeking early guidance from a CPA in your first year of business can be extremely helpful.
While you don’t necessarily need a CPA to help setup your accounting books (but it is important to have good, organized & accurate books!), getting the proper guidance from a CPA from the start on tax matters and/or items which may affect your tax liability and deductions is extremely important. After all, why risk doing it wrong and being penalized for it when you can do it right from the start!