Tax season is approaching quickly, and many Lansing-area businesses will file taxes for the first time. Maner Costerisan is offering advice to startups and new businesses to help guide them through the tax process.
“Navigating taxes is a difficult process for most businesses, but it is especially difficult and stressful for startups because they tend to have little to no knowledge of the process and limited time and resources to devote to completing them,” said Stephanie Calver, a Maner Costerisan certified public accountant.
Jennifer Terbrack, Maner Costerisan CPA, said the best way for first-time filers to have a smooth, successful tax season is to start early.
“Maintaining accurate and up-to-date records are essential to filing a complete and accurate tax return. New business owners should get in touch with an accountant early to establish good bookkeeping habits,” said Terbrack. “If they are comfortable keeping their books, then they should be in touch with an accountant for filing their business tax return in January as the deadline will be March 15 or April 15 depending on the type of entity they are.”
How businesses file their taxes depends on how they set up their business as a taxable entity for 2019. For example, there are different filing considerations for S corporations, C corporation, LLCs, sole-proprietorships and nonprofits. How a new business chooses to organize itself as a taxable entity determines their specific filing deadlines and forms that need to be filled out.
Maner Costerisan CPAs Susan Hafner and Madalyn Henry said first year businesses should compile permanent documents like articles of incorporation or organization, pertinent contracts and/or leases, and documentation of ownership officers, board members and capital contributions. If a business keeps a manual set of books, it should provide monthly bank statements and check registers. Additional information may or may not be required relating to business vehicle mileage, charitable contributions and meals/entertainment expenses.
Compiling and tracking this information will help businesses have the information needed to avoid costly mistakes on taxes.
In fact, a simple error that goes unnoticed can result in late fees and penalties from 0.5% percent per month or partial month, to a maximum of 25% of the amount owed. If the IRS determines the error was caused by not taking enough care or ignoring laws, businesses may be charged a further penalty for negligence.
“There are several nuances that could slip by an inexperienced preparer in their first year of filing a tax return, such as certain elections they should make, schedules they may be required to file or even just filing on-time,” said Henry. “Some of the more common mistakes we see made on first year returns would be misreporting income, missing possible deductions or credits available to them or the return is just out of balance or missing certain information.”
Henry said mistakes like these are easily avoidable and easily caught by the IRS. Knowing what to look for in order to catch this kind of mistake or find deductions or credits is a vital process to ensuring new business owners aren’t surprised by additional filing fees and fines due to lack of compliance, and that they don’t miss important deductions that affect the business’s tax debt to or refund from the IRS.
“There are many deduction and credits out there that first-time filers aren’t aware of, but a big one is the new Qualified Business Income Deduction,” said Terbrack. “There is plenty of material out there informing people about this deduction, but the tricky part is calculating all of its components correctly.”
Terbrack said the best way to avoid making these mistakes is to find a trustworthy CPA that has dealt with these issues before.
“Using an outside accounting firm can free up a business owner’s time, allowing them to focus on their core business and help avoid costly penalties if tax returns are missed, filed late or filed incorrectly,” said Ken Schafer, Maner Costerisan CPA. “Using an accounting service also helps provide the owner with timely accounting records so they know how their business is doing.”
Firms have different specialties and expertise. Services can range from weekly consultation to annual accounting services. Some businesses only need assistance with tax return preparation.
“It’s very important to carefully choose an accountant or tax service based on the level of service you need,” said Joe Burelle, Maner Costerisan CPA. “I would recommend asking other businesspeople for their recommendations and why they recommend that person or company.”
“Do some research, and don’t hesitate to interview accountants and CPAs. It’s important to find that person with whom you’re comfortable so you can ensure they are a trusted advisor who understands your business and can help you accomplish your financial goals as you grow your business.”
For more information for first-time filers or to learn about working with a CPA, visit manercpa.com.
About Maner Costerisan
Maner Costerisan is a full-service public accounting and business advisory firm dedicated to providing quality and reliable services targeted to specific client needs. When clients choose us, they choose a total solution – we pride ourselves on bringing more to the table than the traditional accounting services. Maner Costerisan is an independent member of the BDO Alliance USA, a nationwide association of independently-owned local and regional accounting, consulting and service firms with similar client service goals. For more information, visit ManerCPA.com.