As 2016 gets underway, many of us aren't really thinking about preparing our taxes. However, if you're a small to medium-sized businesses owner, filing your taxes earlier in the year in January or February — rather than waiting until the April tax deadline approaches — can save you money, time and a lot of hassle down the road.
Given the growing threat of tax identity theft, filing your taxes early can help minimize the chances of a thief submitting a fraudulent return on your company's behalf. Filing early could also help reduce costly tax errors and provide access to the best tax preparers. But that's just the start.
Here's a rundown of how getting a head start on your taxes could be the right move for your business.
Stop Tax Identity Theft Before It Happens
Tax fraud criminals look for opportunities to file fraudulent tax returns and steal refunds. Many people assume these criminals target individuals, but they often also go after businesses.
SMBs can sidestep this risk by filing their taxes early and closing the gap for any thieves to intercept their refund. If a thief files after the business does, the IRS will flag the return and know it's not legitimate. However, if a criminal files first, the IRS may not have a suspicion that it's fraudulent until after the business owner files.
Reduce Your Risk of Business Identity Theft
Business identity theft is a growing threat to small businesses around the country, and it all begins with a criminal obtaining confidential information, which can often be found on tax documents. By staying organized and collecting tax documents as soon as they come in, you can prevent a criminal from stealing information that could lead to full-blown business identity theft.
When this happens, a criminal could compromise the name of an entire company and use it to acquire credit. The criminals could choose to go on a spending spree of sorts, purchasing computers and other electronics that might seem like business necessities but then will later be sold for cash. The damage that results from business identity theft can ruin a company's ability to obtain future credit, put a drain on finances and cause a major disruption in workplace productivity.
Avoid Costly Tax Mistakes
When SMBs file early, they're less likely to make costly errors, which often happen in the haste of meeting a deadline. This can save a company hundreds or thousands of dollars in overlooked deductions or by avoiding errors, such as using an incorrect tax rate. Filing early also provides access to the best tax preparers, who might otherwise be unavailable deeper into tax season.