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Five Tips To Prepare For This Tax Season

Forbes Business Development Council

Business Development Manager at Karla Dennis & Associates INC, overseeing the Sales Department in North America. Follow me @karltondennis.

For small-based businesses, I've put together my top five tips to prepare for this tax season.

1. Catch up on your bookkeeping right now.

During this time period, a lot of business owners have scrambled to try to increase the profits inside of their organization by increasing marketing during the pandemic. Especially as the internet has become the new way to grow your business in this digital space that we are in where we are not able to meet with our clients face-to-face. Many business owners saw a spike in their income, while some business owners saw a loss. So the first thing you should do as a business owner is make sure that bookkeeping and accounting are completely caught up. You should know exactly how much profit and how much loss you brought in for the year. 

2. Do a tax projection. 

You can determine right now, based on the income and expenses you have, what is going to be your tax liability. What is the check that you are going to need to write to the local tax collector and what is the check that you might need to write to the state? Are there any programs or tax credits that you qualify for and you can possibly apply to before the end of this year to reduce your tax bill? Having a tax projection will allow you to know if you may qualify for any tax credits.

3. Keep pandemic legislation in mind.

Pay attention to recent tax law changes made in 2020 as you prepare your tax returns. There are four major legislative changes that business owners should keep in mind this tax season: Coronavirus Aid, Relief and Economic Security (CARES) Act; Families First Coronavirus Response Act (FFCRA); Paycheck Protection Program (PPP); and PPP Flexibility Act. Forbes Finance Council Member, Karla Dennis, has written previously on important aspects of each to keep in mind as a business owner.

4. Run and review payroll.

It's important to understand the ins and outs of your payroll, and you can start by reviewing it. If you're in an S corporation, you should be running payroll and taking reasonable compensation as a part of being an S corp. If you have employees, make sure each one of them completes their W-4 withholdings. 

5. Take a look at retirement contributions.

These retirement contributions can be made all the way up until April 15th. Retirement contributions can help you avoid giving Uncle Sam additional money and help you grow your retirement at the same time as a small business owner. Your money will be invested into the marketplace and will grow. This is a way for you to avoid taxation before the end of the year when you have to file taxes come next year.

These are five tips to prepare for this tax season as a small business owner. Make sure to contact a licensed tax advisor if you have questions about how you can best prepare for this tax season. 

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


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