What Is Tax Season And How To Prepare For Your 2022 Tax Return

Tax season can cause a lot of headaches for many business owners — but fear not! This article will provide you with all the details you need so you will feel prepared as you tackle this year’s tax season. We’ll also answer the most frequently asked questions about the 2022 tax season and give you some bonus tips to help you get through this time of year with ease.  

What is tax season? 

Tax season refers to the period when most individuals are required to file and submit their tax returns. A tax season typically runs from January 1st to April 15th every year, though it can vary from year to year.

For example, the 2018 tax season started on January 28th, 2019, and ended on April 15th, 2019 (with a few exceptions for state holidays). Meanwhile, the 2020 tax filing season also started on January 28th but ended on July 15th, 2020, as the IRS decided to extend the deadline in response to the COVID-19 outbreak. 

Any tax returns submitted after the end of tax season are subject to late penalty fees and interest charges. That’s why, if you require a later deadline for any reason, you should always contact the IRS beforehand to request a temporary delay. 

During tax season, in addition to filing their own taxes, business owners must provide tax documents to their employees, contract laborers, and others, such as royalty earners, detailing the information needed to complete an individual’s tax returns. 

See also: How To File Taxes For The First Time: A Complete Guide To All Your Questions.

2022 Tax Season FAQ

1. When will I be able to file my 2021 taxes? 

According to the IRS, you can start filing and submitting your 2021 taxes on January 24th, 2022, at the earliest. 

If your income was $73,000 or less in 2021, you can file your taxes for free through the Internal Revenue Service (IRS) Free File program

2. What’s the deadline for filing my 2021 tax return with the IRS?

The deadline for most taxpayers to file federal taxes is April 18th, 2022  because this year, April 15th is Emancipation Day, a federal holiday. 

Taxpayers in Maine and Massachusetts have until April 19th to file their returns as both states recognize Patriots’ Day.

3. Can I request an extension?  

Yes. You can request an extension by filing Form 4868 by April 18th, 2022. Taxpayers who request an extension will have until October 17th, 2022, to file their 2021 tax returns. 

Remember that a filing extension does not extend the time you have to pay the IRS. To avoid late penalties, you must pay an estimated amount of what you owe by April 18th (or April 19th, depending on where you live). An extension simply extends the time you have to complete your paperwork and finish your tax return.

See also: Understanding the IRS’s Tax Underpayment Penalty and How to Avoid It.

4. When will I get my tax refund? 

You can get your tax refund within 21 days if you file electronically, file correctly according to the IRS’s criteria, and choose direct deposit. The IRS strongly advises against filing your taxes on paper as the process takes longer, which may delay the time it takes to issue your refund. 

See also: What Is A Tax Write-Off? 5 Most Common Write-Offs For Small Businesses

5. How can I keep track of my tax refund?

You can check the status of your refund directly on the IRS website IRS.gov/refunds or use the smartphone app IRS2Go

Your refund status will appear on your account within 24 hours after the IRS receives your e-file return or four weeks after you’ve mailed a paper return. If your status is ‘received,’ the IRS has received your return and is processing it. If your status says ‘approved,’ it means your tax refund is on its way.

6. How should I enter my AGI when filing my 2021 tax return electronically if the IRS hasn’t processed my prior return?

When you file electronically, you will be asked about your previous year’s adjusted gross income, or AGI.

If your 2020 tax return hasn’t been completed yet, the IRS recommends entering $0 for your prior-year AGI. Enter $1 as your prior-year AGI if you used the non-filers tool to register for an advance child tax credit payment or the third stimulus payment last year.

See also: When Uncle Sam Screws Up: What to do if the IRS loses your refund.

Tax season 2022 with Shoeboxed

Bonus tips to get through a tax season peacefully 

Here are some useful tips that you can use to lower taxes, save money and avoid tax penalties. 

1. Always be aware of the deadlines

Make sure you write down all of the important tax-related dates on a checklist and set reminders on your phone or Google calendar to get your taxes filed and submitted on time. Here is an example:

  • January 24: First day you can file federal tax returns
  • January 31: Deadline for employers to give employees Form W-2 for filing
  • April 18: Last day to file your 2021 tax return, request an extension, and pay taxes owed
  • April 19: Last day to file your 2021 tax return, request an extension, and pay taxes owed for Massachusetts and Maine residents
  • October 17: Due date to file if you request and are granted an extension

If you file and pay late, you will be required to pay a late-filing penalty of 4.5% per month of the tax owed and a late-payment penalty of 0.5% per month of the tax due. The highest penalty for late filing is 22.5%, while the maximum penalty for late payment is 25%.

2. Have all records readily available  

Make sure you have the necessary supporting documents and records for all claims on your tax return including, but not exclusive to: W-2s, 1099s, receipts, canceled checks, and others. We recommend having a well-organized system that keeps all important information together, and Shoeboxed can help you do just that. Shoeboxed is a software program that quickly and efficiently digitizes your receipts and documents. It automatically extracts and categorizes important data from your receipts, then stores them securely in the cloud. Most importantly, scanned documents from Shoeboxed are legibly accepted by the IRS. Get your records organized and stored with Shoeboxed to ensure you don’t have to pay any more tax than necessary! 

Final thoughts 

Understanding the ins and outs of tax season will help you be better prepared for this important period of time. Keep all the important dates top of mind and have all your documents ready to make your tax returns process easier and more efficient. 

Try Shoeboxed for FREE today!

Why Cash on Hand Is Important to Your Business?

Cash on hand is a crucial part of running a business as it influences numerous choices and decisions a business makes. If you want to run a sustainable business, you might want to consider the concept of cash on hand. In today’s article, we define what cash on hand is and its importance to a business.

What is cash on hand?

Cash on hand, also known as cash or cash equivalents (CCE), refers to the sum of all available cash a business has. This includes actual cash as well as accessible balances in checking, savings, money market assets, and other such accounts. In some cases, available credit funds may also be included.

To put it short, cash on hand doesn’t include only cash. It also comprises any liquid asset that could be quickly turned into cash—typically within 90 days. These include:

  • Money market assets
  • Marketable equity securities (stocks)
  • Marketable debt securities (bonds)
  • U.S. Treasuries assets
  • Mutual funds
  • Exchange-traded funds (ETFs)

The key distinction between cash on hand and other sorts of assets is the immediacy of access. In general, it isn’t necessary for the funds to be  physically present on the premises to be considered “on hand.” As long as the business has access within an immediate time frame, the funds are considered part of this category.

Four situations in which cash on hand is needed

Cash on hand is important to any business because it can mitigate risk and come in handy in a variety of situations. We discuss the major ones below. 

Cover expenses on time

Expenses are a necessary part of any business because they are the costs required to run a business. Expenses range from office rents and utility bills to marketing or sales campaigns budgets. 

Let’s say the utility bill is due on the 18th of the month. It’s the 15th, and you haven’t collected enough payments from your clients for some reason. It seems like you have to use extra business funds to cover this expense. 

Unfortunately, funds are already allocated to different uses or purposes, and there are no “spare” funds you could use. If you miss this payment, you’ll be charged a late fee. More importantly, your service may be switched off, and it’ll cause disruption to your business activities. 

Having cash on hand ensures you always have enough available cash or credit to cover expenses at all times and to avoid any unnecessary late fees. Additionally, you should always have an adequate contingency fund so that unexpected, urgent expenses can be paid without interrupting business activities. 

You might be also interested in: 5 Tips to Control Your Business’ Expenses

Reduce transaction costs

Transaction costs are fees incurred when you pay for a product or service through a gateway. If non-cash payments are your main payment option, chances are your business will have to pay a large amount of transaction fees. 

For small businesses or startups, it’s important to keep expenses as low as possible. One way to achieve this is by cutting out unnecessary or undesirable expenses such as payment processing fees from wire transfers, credit/debit cards, or gateways. 

However, when non-cash payments are becoming increasingly the norm in today’s world, it’s impossible for a business to stay completely cash-only. But you can at least lower payment processing fees by:

  • Choosing a low-fee payment processing system
  • Factoring these fees into your pricing
  • Negotiating lower fees
  • Accepting multiple forms of payments to balance out these fees

See more: Business Transaction: Definition, Types, And Example.

Survive an economic downturn

The COVID-19 pandemic has affected day-to-day life and has slowed down the global economy. It’s reported that over 200,000 businesses in the U.S. had to shut down their operations permanently due to the pandemic. 

If your business can survive this dark time and be able to reopen, not only will you have to adjust many of your business operation activities but also follow requirements to adapt to the new conditions. Organizations like the CDC issue such requirements to help businesses and their employees prevent exposure and infection of the Covid-19, for example, cleaning and sanitizing the facility, adding a new ventilation system, or plexiglass partitions. 

Having money on hand might be a lifesaver during these trying times. It’ll assist you in adapting to the “new normal” without going into debt.

Scale the business

Expanding your business may help you increase your customer base, improve sales, and most importantly, get higher profits. But scaling up a business requires both much harder work and lots of investment. 

When upscaling your business, you’ll have to invest in new technology and/or recruit new people. Technology, including software and machines, are frequently one-time purchases. So, rather than taking out a loan or a line of credit and having to pay interest for years, it makes more sense to use your current assets.

Sometimes, your business can grow bigger by acquiring another business. Mergers and acquisitions have become a popular business strategy for companies looking to expand into new markets or territories, gain a competitive edge, or acquire new technologies and skillsets. This sometimes appears to happen overnight. Without having immediate access to the funds to acquire a valuable business, you might miss out on a great opportunity.

The bottom line

Cash on hand refers to a business’s funds that can be used immediately. It comprises cash, any accessible balances in checking, savings, money market and liquid assets. Cash on hand is important to any business because it ensures there will be enough funds to cover expenses, survive an economic downturn or even scale a business.

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on Shoeboxed. Shoeboxed is a cloud-based software that helps businesses turn their piles of paper receipts into digital data. With Shoeboxed, you can do tasks such as scan, store, and organize receipts, manage business expenses, and even track mileage for business travelers. It’s simple to install and easy to use.

Best Ways to Store Your Receipts and Keep Them Organized

Are you frustrated with the piles of receipts taking up your desk space? Have you ever felt stressed when you couldn’t find an important receipt? Or have you ever lost money just because you threw away your past receipts? It doesn’t have to be like this!

This article will share the best ways to store your receipts effectively, so you’ll never have to worry about them! 

Why should you store and organize your receipts?  

Do I really need to store my receipts? 

This question has probably popped up in your mind many times. You may think once a transaction is successful, there’s no reason to hang on to its receipt.  

But, the answer is yes! Here are the top three reasons why you should store your receipts and keep them organized: 

  1. To get ready for the tax season 

As a business owner, it’s in your best interest to lower your taxable income and increase your potential for a tax refund. The good news is most of your business expenses qualify as deductions with the IRS. However, the IRS will want to see receipts and other related documents to verify that your declared expenses were truly spent for business purposes. That means no receipt, no tax refund! 

See also: Understanding the IRS’s Tax Underpayment Penalty and How to Avoid It.

  1. To reimburse expenses correctly 

Often your employees have to use their own money to pay for something on behalf of your company. They then fill in an expense report to get reimbursement. How can you verify if their claims are genuine or not? Receipts can help you! They let you know exactly when and where the transaction took place. Most importantly, receipts tell you the exact amount you need to compensate. This prevents fraud and unwanted disputes in your workplace. 

  1. To stay on top of your spending 

Sticking to your budget is not an easy job. One effective way to do so is to accurately maintain records of every transaction. By doing this, you can have a clear vision of how much you have spent, what to cut out, and which expenses were not worth the money. Consequently, your overall cost and cash flow management will also become more efficient. 

Receipts are indispensable items to ensure your recordings are correct. They are solid supporting evidence for every bookkeeping entry, providing error-free financial reports and helping you stay in control of your expenses. 

See also: How To Track Business Expenses 15 Best Tips & Tools.

How do you store receipts? 

Now that you understand the importance of keeping your receipts, we will show you the best ways to store them. 

There are two common approaches to storing your receipts: traditional and digital. We will go through each method in detail, and hopefully, you will find the solution you are looking for! Let’s go! 

Storing your receipts traditionally 

Traditionally here means you want to collect and organize the paper copies of your original receipts. Here is what you may want to do: 

  1. Buy stationery organizers 

Buying stationery organizers to store your receipts is never a bad investment. File folders, storage cabinets, tab dividers, binders, sheet protectors, colored pens, etc., are all great tools to keep your paper receipts organized. 

A binder is the most suitable choice if you don’t have many receipts. Place sheet protectors in the binder, then slide the receipts into the protectors. If you have a lot of receipts to keep, get storage cabinets.

  1. Categorize your receipts 

Create a system to sort different kinds of receipts. It’s best to categorize based on the type of expense. For example, keep your utility receipts in one separate folder and office supplies in another. Inside your utility receipts folder, you can create subfolders like gas, electricity, water, etc. 

This will save you lots of time when filing taxes because your tax form breaks down the expenses section into different sub-categories, too. 

Consider adding numerical or colored codes to each receipt to classify expenses (e.g., using a prefix of 111 or using the color red to signify utility expenses). Placing the receipts in chronological order is also highly recommended! All these extra steps can quicken your process of categorizing and finding receipts.  

  1. Avoid piling up your receipts  

Schedule a convenient, regular time to sort your receipts. If you usually accumulate a large number of receipts every month, you may want to spend some time every Friday afternoon to go through your receipts. If you have a small volume of receipts, you can wait until the end of each month. 

Regardless, don’t put the task off and let your receipts pile up!

Storing your receipts digitally  

If you want to leverage technology to store your receipts, Shoeboxed is your best option. Shoeboxed stores your receipts and saves you valuable time. 

Just scan your paper receipts, and the Shoeboxed app will automatically extract all of the important data and categorize them. A team of data experts will verify your extracted data and make immediate corrections if there is an error. Your newly categorized receipt data is then available to check and search anytime, anywhere you want.  

Super easy, right? Quick, secure, and accurate; Shoeboxed definitely changes the game in how businesses store receipts. 

Final thoughts 

Storing receipts and keeping them organized is essential for business expense management. Whether you choose to use traditional or digital methods, make sure you always keep tabs on your receipts. 

And if you want to go digital and save time and hassle, click HERE to save 25% off all Shoeboxed plans for a limited time!