eCommerce companies are exploding! Recent statistics suggest that by 2025, eCommerce sales could hit $7.4 trillion. This is over two times what the 2019 eCommerce market value was.
Every year, as eCommerce sales grow, so does the total of eCommerce taxes the IRS collects.
Is your eCommerce business prepared for Tax Day?
To ensure a smooth process while also minimizing the risk of an audit, it is best to prepare your checklist well in advance. You may even decide it is best to opt for accounting help with your bookkeeping, which this article will discuss in further detail shortly.
But to begin, how do you make sure you are ready for Tax Day? Here is the one and only checklist every eCommerce business needs.
Be on Time
If you miss a deadline, you could incur some expensive penalties. Make sure that you hit the government’s deadlines.
First, Tax Day for 2022 is Monday, April 18th in the United States. Depending on your business, eCommerce companies can vary with the additional documents that the IRS may need prior to the April 18th deadline.
When you have employees or independent contractors, there is another deadline to keep. You will need to provide W2s and 1099s to your workers prior to a February 1st deadline.
Partnership tax and S-Corporation returns are due March 15th. If you need more time for either of these business tax returns, you could file for a tax extension, but you need to send your request on time.
Mark your calendar and stay on track. Avoid paying unnecessary penalties.
Organize Your Receipts
This is easier to do throughout the year than to wait until the last minute. Plus, you really want to go paperless.
You can store your eCommerce business receipts online. This will eliminate a bunch of clutter and messy physical paperwork at your desk.
Keep Bookkeeping up to Date
Beyond prepping for filing taxes, it is helpful to always have a clear picture of your eCommerce business’s income and expenses. It helps you make informed decisions when you have accurate data at your fingertips.
For Tax Day, clean bookkeeping is a good line of defense in case you run into an audit for your eCommerce taxes.
Alternatively, if you do not have a big enough eCommerce business to hire a full-time CFO to protect you against tax audits, an outsourced CFO is a great option to still get the right amount of help and protection you desire.
Accuracy in Your Bookkeeping
When you enter information wrong, while it may be an innocent mistake, this can lead to unintentionally sending the IRS a false claim.
You are likely inundated with other parts of the business, so accurate bookkeeping can be challenging. If this sounds like the case for you, vet out options for accounting help.
Submitting 1099s to the IRS
While you should send an independent contract their 1099 prior to February 1st, the IRS needs a copy too. You must send the IRS a copy of Form 1099 by March 31st.
Do You Need a Tax Day Extension?
While you are not getting out of paying your regular Tax Day eCommerce taxes, it still gives you more time to file an accurate return. Especially if you find that your tax filing is overwhelming.
Again, if you are struggling to meet the Tax Day deadline, an outsourced CFO can help with either meeting the deadline or pushing it back following the appropriate IRS process.
How to Request an Extension
Not only do you need to complete a form requesting a tax extension, and either mail it or electronically file for an extension on or before April 15th, but you also need an estimate of your taxes. The IRS requires payment for an estimate of how much you think you owe.
If you can do this, the extension you file for will be automatic. If the IRS will not allow your extension, the IRS will contact you. Even if you file an extension, if you do not pay the amount of taxes you truly owe on time, your eCommerce business is liable for penalties and interest for what was missed.
Know Your eCommerce Tax Deductions
Online sellers have tax deductions available to them. It pays to have an expert help you with your filing and take advantage of all the deductions available to you.
This may include deductions for:
- A home office
- Education
- Phone and internet costs
- Web hosting and online store themes
- Contractor work
- Shipping costs
- Vehicle use
- Online service fees
- Equipment
- Professional services
Ask a tax professional or an outsourced CFO which Tax Day deductions you can qualify for.
The Right Bookkeeping and Accounting Help
You may need help with your eCommerce taxes, and that is okay. In fact, it is better than okay! You are better off safe than sorry.
If you are worried that getting accounting help may add an unnecessary cost for your eCommerce business, know that almost always this is not the case. When you hire a professional to help you, they save you money, so you won’t just be spending money. You are saving too.
Further, when looking for help, to get the optimal savings and consideration, choose to find accounting help that knows your industry. eCommerce is unlike other industries. You want a tax specialist who understands the nuances of eCommerce companies like yours.
The Tax Day Checklist for eCommerce Companies
Tax Day comes and goes every year. It shouldn’t be a time of year you dread. With eCommerce taxes, it should be a blip in time, especially when your bookkeeping is up-to-date and accurate.
Keep this checklist in mind and these helpful tips for a successful Tax Day experience.
With The eCommerce Accountants, we understand you and your issues! Don’t let your revenue fly out the door without having a professional help you.
Pay what you owe, avoid audits, and sleep well at night. Contact us now!
