If you run a sole proprietorship, partnership or LLC, you’ll file your business income and expenses as part of your personal tax return. Because your business finances are tied up in your personal finances, taking care of your taxes early is an important part of managing your company.
Not excited about tackling those taxes? Here’s why you should reconsider.
Get your refund sooner
If you expect to receive a refund, then the sooner you file, the sooner you’ll have your money. With that extra money in your pocket you make any personal purchases or pay off any debts. Better yet, you can invest that money back into your business. Use the money to purchase new software, upgrade to new equipment or save it for a rainy day.
Allow for time to save for payment
If you’ll be owing more taxes instead of receiving a refund, you may need time to save. Filing early lets you know the amount you owe. This can give you a few weeks or a few months to save up your payment in time for the April 15 deadline. Any balance you owe after April 15 will accrue fees. Depending on how late the payment is, you can pay anywhere from 0.25 percent to 25 percent more. While you can use a credit card to make your payment, you could be subject to additional fees. It’s better to plan ahead and save money each week so that you can get your payment out of the way.
Evaluate whether your W-4 needs updating
Form W-4 is used to determine how much you should be withholding from your paycheck. If you pay too much, you’ll get a hefty refund; however, you’d likely prefer to keep your money with you instead. If you’re not withholding enough, you’ll owe money come tax time. While you’re filing, reevaluate your W-4 to see whether your situation has changed. Change in marital status, new dependents and expected income may have you thinking differently about withholding. The sooner you can make this adjustment, the more accurate your remaining paychecks will be.
Minimize your risk of identity theft
Filing early has another bonus you may not have realized: minimizing your risk of identity theft. Identity thieves use Social Security numbers to file fake tax returns in hopes of collecting the refund. Thousands of identity thieves run this scam every year, and while the IRS is able to catch most, some thieves still receive refund payments. If this happens to you, then when you submit your tax return the IRS will flag yours as a duplicate. You will then have to file with paper forms by mail. The whole process will significantly slow your return. If you’re expecting a refund, it could take almost a year to finally receive your money. Don’t let this happen to you just because you were too lazy to start.
Filing your taxes early crosses a big task off of your to-do list and lets you focus on your business. If you’re looking for help taking care of your small business or personal tax return, MCG Solutions can help. Contact us today to get started.