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26 February 2013

Gather Your Documentation…The Tax Man Cometh

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If you are self employed, you have the distinction of having the earliest due date (which is now past due) of January 31, to file your taxes. If you’re a farmer or fisherman, you’re allowed another 4 weeks, with your due date being March 1. A couple weeks later, if your company is categorized as a corporation, your due date is March 15, 2013. April 15 is the due date for the bulk of the remaining tax returns including individuals (unless you’re living abroad) and partnerships. Non-profits and individuals living abroad are the latest tax filing groups with due dates of May 15th and June 17th, respectively.

So…what information do you need to gather to calculate your business taxes?

If you have kept up with your basic book keeping tasks throughout the year and your records are all electronically compiled, tax time is basically just taking your financial reports and dropping the appropriate numbers into the correct boxes on the various IRS forms. For a business, you should begin with your Balance Sheet and Profit & Loss statement. You may need additional supporting documentation from sales reports, vendor profiles, etc., but your basic financial reports should provide the bulk of the information you or your tax accountant will need to comply with your tax filing. The IRS website is filled with the various forms and schedules one must fill out, including the requisite instructions to guide you to put the right numbers on the right lines.

DIY tax computations should include tax software

If you are a “do it yourself” type of individual, I recommend computer software to ensure all computations are calculated accurately and any new tax laws that might apply to your specific situation are taken into account. With the tax code having grown to such a behemoth state, even full-time tax accountants have trouble staying abreast of every single nuance, exception, and special situation that has been codified.

I hope you get a small tax refund this year

Why a small refund? Well obviously, the refund part is so you don’t have to write a check to the IRS. The small qualifier is my wish for you because it means you haven’t been bank-rolling a non-interest bearing loan to the IRS for the last year. Because of course any money due back to you is an overpayment that the IRS has been holding onto, which is the same as you loaning this money to them, without the benefit of receiving interest for your self-less act.

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