Preparing your small business for tax season

It's that time of year when the dust has settled from New Year's festivities and small businesses are getting back to the grind after the holiday season. In addition to the promise of a new start and the impetus to make resolutions a reality, January also has a less exciting aspect - the onset of tax season.

In a recent Forbes article, the Small Business Authority offered several planning tips for entrepreneurs looking to make the tax process as painless as possible.

Companies can be placed into one of the following classifications: Sole Proprietorship, Partnership, Limited Liability Corporation, S-Corporation and C-Corporation. Make sure you know which category is appropriate for your company or risk a higher tax rate than necessary.

It's important to realize how serious taxes are. Failure to file or filing inappropriately is not taken lightly, and your company could face penalties, fines and other costs. If you don't feel confident about calculating income tax, payroll tax and sales tax correctly, don't be afraid to bring in an outside consultant. The authority recommends Corporate Tax Network for small enterprises with up to 20 employees, while larger businesses can consult advisers such as J.H. Cohn.

Staying abreast of regulatory developments could end up saving you money. You as a small business owner could be eligible for a range of tax deductions related to automobile usage, travel expenses and working from home.

According to a CNBC article by small business writer Barbara Weltman, savings can also be found by claiming depreciation deductions on new and used equipment and donating cash or inventory to charities recognized by the Internal Revenue Service.