In your first year as a business owner, you are sure to experience lots of new things, including filing business tax returns for the first time. Tax preparation in Overland Park can seem a bit overwhelming for a new business, so our team at Pro 31 Tax and Accounting (based in Louisburg, KS) has compiled a list of some key considerations to take into account for small business tax preparation in Overland Park.
Review Your Return
Take a look at the business tax return you will be filing to find out which line items you’ll be filling in with amounts. Be prepared to answer any questions regarding the nature of your business, how long you have been in business, and where the business is located.
Another essential piece of Overland Park small business tax preparation is making your accounts have the correct categories of income and expenses so you can accurately manage your business and file your returns correctly. It is critical for all businesses to keep complete and accurate records.
Choosing a Cash or Accrual Basis
As a business owner, you must choose whether you want to prepare your business tax returns on a cash or accrual basis. Here are the differences between the two options:
- Cash Basis: Income is recognized when collected, expenses are recognized when they are paid
- Accrual Basis: Income is recognized when earned, expenses are recognized when they are incurred
Typically, lenders prefer the accrual basis option, but returns can still be prepared on a cash basis. If you have any questions about which basis is best for your business, speak to your small business accountant in Overland Park.
What Depreciation Method Should You Choose?
Your next decision regarding tax preparation in Overland Park is choosing the best depreciation method for your business. The IRS allows a first-year deduction for nearly all equipment and furniture instead of writing off the cost over multiple years. In general, most business owners opt to take the first-year write-off.
One thing to remember is that businesses without profits cannot deduct the first-year depreciation deduction. However, they are able to carry it forward to profitable years in the future.
Record Your Automobile Expenses
Businesses should always keep a detailed log of their automobile usage. Your auto log should contain the following details:
- Who You Were Traveling to See
- When and Where Travel Occurred
- Was the Trip Business Related?
Although it is common for business owners to only log their business-related auto activity, Overland Park tax accountants recommend keeping a detailed log of all auto expenses. Businesses that itemize their deductions can actually deduct transportation as a medical expense or a charitable contribution.
If you have any other questions about Overland Park small business tax preparation, give our Pro 31 team a call at (913) 837-3131 at our Louisburg office, or contact us online today and we will be glad to assist you.