Tax season is a good time to think about tax preparation for the next year. There may have been unforeseen obstacles you encountered with filing this year that you can avoid next time. Since many of us are working from home due to stay-at-home orders because of the pandemic, our new reality will shift our tax preparation process, so it’s important to start noting changes and differences now, before you go to file. Now that your 2019 taxes are filed, it’s time to start preparing to file your 2020 taxes in 2021. We’ll take you through the step-by-step process on how to do just that. File the right tax return for your business Know your tax filing deadline Gather your records Look for tax deductions Deduct your estimated tax payments File your taxes File the Right Tax Return For Your Business There are different tax returns based on the size and needs of your business. Choosing the right tax form depends on how you operate your small business. Sole Proprietorship Schedule C Schedule C-EZ, Form 1040 (individual income tax return) Limited Liability Company (LLC) Form 1065 (return of partnership income) Form 1040 (individual income tax return) Schedule C (a Schedule C is only used if one person owns 100 percent of the LLC business) Partnerships Form 1065 (return of partnership income) Form 1040 (individual income tax return) S Corporation Form 1120S (income tax return for S corporation) Form 1040 (individual income tax return) Schedule K-1 (individual owner shares) Additionally, the IRS requires businesses who made or received payments for certain transactions to file an information return. Information returns are not income tax returns but are a requirement for reporting purposes to assist other taxpayers in preparing their return. Examples include: 1099s, 1098s, 1095s and W-2s. Know Your Tax Filing Deadline Although the IRS extended the deadline this year for …
Modernizing Information Returns
Last year, the Internal Revenue Service (IRS) launched a multi-year modernization plan to strengthen cybersecurity protections and improve how the agency engages with taxpayers. Through the IRS Modernization Plan, the federal agency will focus on advancing technology systems and building critical infrastructure for the country’s tax system. Included in the plan is an effort to update systems that process information returns, which are used for tax verification and reporting transactions to the IRS. The Information Returns Processing (IRP) environment processes information returns filed by third parties like employers, financial institutions, educational institutions and other government agencies. The current system uses an intake system through paper or electronic submission, validates data and then updates accounts for compliance and analytics. The IRP environment works but is no longer able to accommodate new requirements. The new modernization effort is needed because old systems are unable to handle a series of legislative mandates such as the Affordable Care Act and Tax Reform Act. The Information Returns Program Development (IRPD) aims to address this re-engineering challenge with seven objectives: Create a modern and flexible solution for acceptance, validation, perfection, management, and use of Information Returns Data. Replace aging systems with modern, adaptive, and sustainable technologies. Use Information Returns Data to support enhanced compliance processes. Consolidate, standardize and simplify Intake and Validation systems for Information Returns. Establish a new design for IR Processing to support new types of Information Returns. Improve data access and data integration for downstream systems. Develop a foundation for streamlining operations. In addition to seeing updates in how information returns are filed, we’ll also see emerging priorities and advances across the system under the four Modernization …