Feb. 10, 2020 | Updated 9:25 AM ET
The IRS penalizes companies for mistakes in the tax filing process: failing to file returns on time; failing to pay their taxes on time; or paying the incorrect amount. These penalties can be steep. For example, if a business fails to file, the IRS assesses a fee equivalent to five percent of unpaid taxes. For a small retailer along Main Street in Doylestown or on Rittenhouse Row in Philadelphia, an IRS penalty like this could deal a heavy blow.
Tax season doesn’t have to be a time of worry and stress for small business owners, though. With proper preparation and the right tools, management can take care of taxes in short order and have their business ready to roll through the rest of 2020. Here are a few steps that can make this possible:
- Review last year’s documentation: One step to smooth the process is to use the 2018 expense report as a guide. Business owners can use this information to review their expenses from the previous year and save time this year. To that end, it can also be a useful step to ensure management doesn’t forget to mark any repeating expenses.
- Use accounting software: Accounting software is becoming more common today, but not all small businesses are putting these tools to use. These programs can make tax season much easier, keeping track of billing, income, expenses and, in some cases, deductions and inventory. This happens in real time, helping small business owners avoid a scramble to gather information during tax season. This not only saves time but also reduces the opportunity for human error.
- Review financial statements: Small business owners will also want to review their quarterly financial statements so they can have a general idea of what their upcoming tax liabilities might be. This enables business owners to better plan and keep track of their finances through the first quarter of 2020.