Completing a self assessment tax return can look complicated, especially if you're unprepared or unorganized for the task. As a self-employed business owner, you'll be required to complete this return. Preparing for it with plenty of time to spare can help make it more straightforward to complete. Nor to mention less stressful. Getting a head start on this event by having a tax planning strategy in place should provide the security needed to get your taxes done on time, correctly and efficiently.
1) What is the end of tax year process for self-employed people?
Preparation is key:
Operating a self-employed business requires you to pay taxes on the profits you make. You'll also need to complete a tax return and provide information associated with your business expenses, gains and income. Preparing for this task is done before the April 15, 2021 deadline. Keeping track of all transactions should help safeguard against paying too much in taxes. No business wants to pay more than is required, which can be done by ensuring you've got each company transaction recorded carefully.
Having an accurate accounting of the income your self-employed business generated via the sale of goods or services should be kept up-to-date. Completing the transactions for all of your expenses is also essential. You can decide later when you're preparing your self-assessment tax return which ones should be used for tax purposes.
How you keep track of the income and expenses you incur during the accounting period is a vital factor to consider. You can choose between the accruals or cash basis, as explained in this bookkeeping basics video. If you're using an accruals basis, all of the income and expense transactions you incur are recorded in the appropriate accounts even if they haven't been paid. Choosing to use the cash basis method means you'll only record the actual income you've received or expenses you've paid during the accounting period. As long as your business meets specific criteria, you'll likely want to use the cash basis method. Getting assistance with this from an experienced outsourced CPA should make it easier to complete and allow you to focus on your operations.
Some of your business costs must be considered as capital expenditure rather than expenses associated with operations. If your business is using the accruals basis method, you are not allowed to deduct any capital expenditures from your profits. Understanding how to categorize these expenditures may be completed more quickly and efficiently by getting help from a seasoned CPA proficient with several different types of accounting software. Consulting with a knowledgeable and experienced accounting professional should help you understand the best choice to make for your business.
2) How should you prepare for a self assessment tax return?
As the end of tax year draws closer, it's essential to start thinking about how you will handle this task. While there aren't many elements of completing tax forms and paying your fair share of taxes that are enjoyable, you can do yourself a big favor and help lower your stress by being prepared for this inevitable event ahead of time.
The first step you'll need to take is to register with HMRC. They'll send you an activation code, which must be used within a specific period. Another essential task is to start gathering data from third parties. Having a copy of all the investments, savings, and bank accounts you possess will help if you need to know the income you've made from property or financial data related to your business's earnings and outlay. Keeping an accurate accounting of your business transactions will also help greatly.
3) What are the 2021 tax deadlines?
- Individual income tax returns (IRS Form 1040:) April 15, 2021
- Partnership returns (IRS Form 1065): March 15, 2021. The extended deadline is September 15, 2021. And if you're using a fiscal year, the deadline is the 15th day of the fourth month following the end of that fiscal year.
- C-corporation income tax returns (IRS Form 1120): For businesses that operate on a calendar year, it's April 15, 2021. The extended deadline is October 15, 2021. For those operating on a fiscal year, the deadline is the 15th day of the fourth month following the end of the corporation's fiscal year.
- S-corporation returns (IRS Form 1120-S): These returns are due March 15, 2021, for corporations operating on a calendar year. The extended deadline is September 15, 2021. If you're using a fiscal year, the deadline is the 15th day of the fourth month following the end of that fiscal year.
4) When should end of tax year prep start?
If we're preparing for the 2020/21 tax year, ending in April 2021, we like to begin preparing between October 15 and December 31, 2020.
5) What can self-employed people achieve with expert tax planning?
Preserving your wealth and paying the least amount of taxes possible is an essential financial objective to have. Attaining this goal as a self-employed business owner may be easier to achieve when you get help creating your tax planning strategy. Doing so may provide you with a reduced tax bill. Having the assistance of a tax expert, such as a CPA on our team at Fusion CPA, allows you to receive help from a professional who is highly proficient in understanding the latest tax laws and rules.
We have a vast amount of experience preparing business owners for their tax liabilities and know how to implement specific methods to help save you money. Contact us today to learn more about how we can help with your tax planning needs. We also offer first-class accounting, business advisory and software integration services that can keep you on top of the financials required for your self-employed business.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.