Tax season can be daunting, but that doesn’t have to be the case for your business. With proper preparation and appropriate tools at your disposal, tax time can become an asset to your organization and help position it for future success.
Make sure your business qualifies for various deductions. For instance, most forms of insurance costs such as liability, property, errors & omissions and vehicle can be deducted.
1. Define your business structure.
Selecting an ideal business structure can have a tremendously dramatic effect on taxes. Different structures come with differing degrees of liability and tax obligations.
As part of your financial planning strategy, it is also necessary to ensure you keep accurate records. This includes documents showing receipts, invoices and contracts related to money transactions incoming and outgoing.
Holding onto these records will assist in filing your taxes more easily. Store them securely with Patriot’s accounting software, and regularly reconcile to detect discrepancies as early as possible – this will save time when filing taxes and reduce penalties.
2. Keep accurate records.
An accurate tax return requires meticulous records. Without them, you run the risk of leaving deductions unclaimed or inviting an audit.
Track all expenses and subscriptions carefully – such as recurring expenses, mileage and software subscriptions – in order to remain financially solvent and accurately track time. Be sure to save receipts for every purchase as proof.
Separating personal and business accounts will help to avoid fees that don’t pertain to your business, such as bank or credit card fees or merchant transaction charges.
3. Prioritize your tax tasks.
As a small business owner, you’ll be required to maintain records of expenses and comply with state and federal tax regulations. Bookkeeping software can assist with automating processes and providing reminders so nothing falls through the cracks.
Track deductions and maximize credits to reduce tax burden, saving both time and stress at tax season by helping prepare ahead. TurboTax Live or an accounting solution like Quaderno provide ways of mitigating some of this anxiety when filing taxes.
4. Hire an accountant.
One effective way to relieve tax stress is hiring an accountant. An experienced accountant can help your business meet all its tax obligations, such as filing and remitting payroll taxes.
If your small business offers employee benefits like health insurance, flexible spending accounts or achievement awards to its staff members, these could qualify for additional tax deductions. To take full advantage of them, detailed records and documentation must be kept; in addition, the IRS frowns upon small business owners who mix personal expenses with those for business expenses.
5. Hire a tax attorney.
Keep accurate records to help avoid tax problems such as inaccurate reporting or failure to file, maximize deductions and decrease taxable income.
Keep in mind that not all expenses qualify as tax deductible deductions, so when making claims make sure that supporting documents such as checks, credit card receipts or invoices can be provided as evidence for claimed deductions.
Tax attorneys can be invaluable resources in swiftly and efficiently resolving tax-related matters, and can negotiate payment terms and settlement agreements with the IRS on your behalf – saving both time and money, as well as protecting you against criminal prosecution.
6. Don’t overpay.
Many small businesses overpay taxes due to relying on CPA advice and payroll tax services for guidance. Understandable since all you have is one hammer; all nails seem like potential problems!
Tax deductions should not simply be seen as write-offs; rather they should reflect wise business decisions that result from accurate bookkeeping year round.
Tax season can be stressful and uncover opportunities for improvement; doing this also reduces penalties and interest charges that could otherwise accrue.
7. Take advantage of tax breaks.
Small business owners can reduce their tax liability by taking advantage of deductions and tax breaks available to them, saving money which they can then reinvest back into their company.
Specialized software costs and subscriptions to business applications may be fully deductible, while equipment and furnishings costs can be depreciated over time.
Gifts given to clients, customers, and employees are tax-deductible expenses; so too are loans to employees and uncollectible accounts receivables. Deductions like these can help significantly lower taxable income and save thousands in taxes.
8. Pay your taxes on time.
Filing taxes on time is essential to running a successful business. If you owe money, paying your taxes by the filing deadline will reduce penalties and interest charges.
Automated accounting software can help you keep on top of your tax obligations throughout the year, relieving some of the stress of tax season while uncovering opportunities for deductions you may have overlooked and helping ensure compliance with all relevant laws.
9. Deal with tax problems promptly.
If you owe money to the IRS, the sooner it is taken care of the better. They take very seriously their collection efforts and do not accept excuses or sob stories as legitimate reasons for why you cannot pay up.
Keep abreast of changing tax laws, deductions and filing requirements to avoid future problems. Should any arise, file an early protest; as unresolved tax issues become more costly over time.
10. Don’t wait until the last minute.
Tax rules change frequently, making it imperative that you stay abreast of them to maximize credits and deductions while avoiding penalties.
Maintaining tax paperwork may seem like an endlessly complex endeavor, but there are ways to simplify and make the process more manageable. Start by prioritizing your tasks and setting aside time each week or month to review financial statements; this will enable you to identify potential issues before they escalate further. Furthermore, consider an automated accounting service as another means for keeping your books updated throughout the year.
