E-filing your taxes has a 99 percent accuracy rate, the IRS reports. It’s usually easier to file your business taxes electronically, particularly if you already use an online accounting system and can import the information into your tax preparation software. In addition, the IRS acknowledges e-filed taxes within 48 hours. There are a few things you should take into consideration when e-filing, however, especially in regard to your sensitive business data. Folllow these do’s and don’ts when filing your business taxes electronically:
- Determine the right forms you need to complete, and then track the deadlines. If you think April 15 is the only tax deadline you need to be aware of, you’re wrong. If you’re the solo owner of a business or you run it as an LLC, you’ll need to file a Schedule C, which has an April 15 deadline. However, if your business is a corporation, you’ll need to complete a Form 1120. This is generally due 15 days into the third month following the close of the tax year (which is March 15 if your tax year ends in December). IRS.gov features the due dates for the various employment taxes.
- Get organized. You may have physical and digital receipts that need to be entered as deductions on a Schedule C. Before you begin in earnest, organize the paperwork and digitize anything that’s needed for recordkeeping. Store in a secured place in the office and maintain a backup elsewhere, like on a cloud server or a flash drive stored externally.
- Properly classify employees. If you have business employees, you need to send them a tax form for any earned income. To do this, you’ll need to categorize them either as an independent contractor (who receives a 1099) or an employee (who receives a W-2). BizFilings provides more information on classifying employees correctly.
- Give out critical information via email. The IRS will not ask you for business or personal information via email. Yet many people do provide bank account numbers, business ID numbers and Social Security numbers through email to thieves impersonating the IRS (aka a phishing scam). If you receive any email communication from someone claiming to be the IRS, delete the email without opening it. If you’ve already opened the email, downloaded any attachments or visited any links therein, you may have given thieves the key to your data. LifeLock offers identity theft monitoring services, so you can see whether someone is impersonating you or trying to open credit cards in your name.
- Use an unsecure Internet connection. If you’re short on time preparing for tax season, you may feel like you should work on your business taxes anywhere. Avoid the temptation to work on taxes anywhere that has unsecured Internet. It’s too easy for thieves to glean data transmitted this way and use that data for their own ends. Only work where you have secure Internet, period.