Merchants' calendars are marked by several important dates: key shopping periods, fiscal quarters and years, and the rollout of new products. However, in the spring, there is one period that stands out above all others: tax time. As it can be for individual filers, tax time can be a trying time for merchants, particularly with the threat of fines and penalties hanging over their heads should they miss the filing date.1
For companies, such a loss represents the needless waste of resources and a waste that can be avoided by setting the right plan in place to prepare for tax time this year and in the years ahead. It begins with these three steps.
Step 1: Proper Classification
Not all businesses are classified identically by the IRS, and the makeup of the company can dictate when its taxes are due.
This year, for example, the deadline for partnerships and S corporations to file their 2017 tax returns is March 15.2 C corporations and individual filers must complete their tax returns by April 172 and exempt organizations have until May 15 to file their taxes.
The IRS Business Structure site is an invaluable resource to use in understanding what forms must be filed given the company’s classification. Treating it like a checklist ensures no forms are missed.
Step 2: Seeking Assistance
Because many merchants lack an on-staff accountant, the choice then becomes: Hire an accountant to handle the business’s taxes or complete the task in-house via the use of an accounting software system.
If the decision is made to hire an outside accountant, merchants can save themselves significant time and money by preparing all the necessary information they can ahead of time. The more prepared the company is, the more inexpensive the process will be.
If utilizing an accounting software system is the choice, understanding the software and all its advantages can be helpful to make the process as easy as possible. This guide can be a handy resource for merchants planning to use accounting software.
Lastly, merchants should also feel free to seek assistance from the IRS itself. The IRS offers several virtual workshops that merchants can use to answer questions and ensure they are following proper protocol.
Step 3: Consider an Extension if Necessary
If completing required tax documents by the required date will prove impossible, merchants may have the option to file for an extension. There are many reasons to request an extension, including:
- The tax season falls during the merchant’s busy period3
- A delay in receiving K1 forms from other companies partially owned by the business3
- To further support retirement contributions (special cases)3
- If the business is currently going through an operating loss (special cases)3
Being rewarded an extension will push tax filing requirements into the fall,2 and while this window allows merchants more time to complete their tax paperwork, it could also delay the acquisition of capital for future projects.3
Devising a plan
While companies across the nation are required to file their taxes at different times and through different forms, depending on their makeup, all will benefit from setting an established plan in place ahead of time. Keeping detailed records and pushing through tax requirements in an orderly fashion is the best way to ensure guidelines are met with as little impact on the business as possible.