Tax Tips Every Small Business Should Follow
For small businesses, tax season can be extremely overwhelming and daunting. It’s something that many describe as the worst time of the year. Alongside the fact that you’re trying to get the best return, managing documents and avoiding hefty fines from the IRS can seem like a nightmare. Luckily there are some things you can do to get through the process as smoothly as possible. Below we are going to talk about some tax tips that every small business should follow. Sound interesting? Then let’s get started!
Outsource your accounting and payroll.
Just because you are a small business doesn’t mean that you have to handle everything on your own. Instead of burning yourself out, consider outsourcing your money tasks such as accounting and payroll. Not only will you be able to focus on more critical aspects, but having experienced professionals handle this side of things will make tax easier to manage. Trust us when we say it’s worth the extra expense and could even save you more in the long run.
Use the right resources.
Technology really is an incredible thing, so if you haven’t already, make sure you are using it to its full advantage. There are so many valuable types of software out there that will make managing your financial records much more straightforward. Some of these require subscription services, but there are others that are entirely free. Do some research, and you’ll be increasing productivity in no time.
Keep detailed records. If you’re going to be using software to manage your business records, you still need to ensure that you are doing it right. This doesn’t just help with tax time but will also make chasing payments much more effortless. Remember, the more detailed everything is, the better. Try and categorize all of your invoices and essential files by month and create an overview each time. You’ll be able to locate what you need, and any errors can be identified quickly.
Know who to contact.
Alongside outsourcing certain services to make tax season more bearable, you also want to have some contact details ready if something does happen to go wrong. Nobody is perfect, and sometimes you may struggle, especially if you’ve handled previous years yourself.
If you have fallen behind on payments, it’s a good idea to look into a tax relief program. They will be able to negotiate with the IRS and help to settle any debt in the best way possible.
Separate your business and personal expenses.
No matter what type of business you are operating, it’s vital that you learn to separate your work and personal expenses. When tax time does come, you don’t want the IRS to look at your own spending habits because it’s combined with work costs. Set up a separate account where all of your money goes in and out of. Then pay yourself a wage from there. It may sound like more work, but it will really save you a lot of hassle further on down the track.
Know strategies to reduce income tax.
As you should already be aware, one advantage of small businesses is that there are certain deductions you can claim to reduce your income tax. Some of which include:
– Work-related travel expenses.
– Business insurance.
– Advertising and promotion.
– Offices supplies.
– Phone and internet expenses.
It would be best to try to learn the different strategies you can use to reduce your income tax at the start of the year. You can talk with your accountant about what is relevant for you. Your deductions will depend on the type of business you are operating.
Hold on to your receipts.
Speaking of deductions, you’ll want to come up with an excellent system to keep track of your receipts. This will increase what you can claim and will make things much easier for your accountant. Luckily, paper records are now a thing of the past, and technology allows you to scan and keep all of your receipts digitally. You can find some of the best apps to get started here.
Contribute to charities.
For many small businesses, supporting charities might seem like something you would rather not focus on just yet. However, despite what you may believe, it has many benefits that you should take advantage of. Alongside helping improve your company’s image, charitable contributions can reduce your taxable income. It’s a win-win-win, so if you haven’t already, it’s worth looking at your options. Your tax consultant should be able to recommend a plan to suit your needs.
Regularly review your business plan.
As your business grows and changes, it’s important that you take a moment to review your initial plan. It’s something that should be a part of your routine if you want to expand yourself further. Who knows, you may be able to make changes to your budget or find even more strategies to handle tax season. Remember, you don’t have to do this alone. Your accountant and financial advisor can all have input to help you make the necessary changes.
Always stay one step ahead.
Finally, one tip that you should follow in preparation for tax time is always to stay one step ahead. If possible, start getting organized right at the beginning of the year, rather than just before the cut-off. Yes, it might seem like it’s easier to leave it to the last minute, but it’s the best way to ensure that everything runs smoothly. Not to mention you have that extra time to sort out any mistakes.
And that’s it! While tax season can be scary, it’s essential to take a few deep breaths. By following the above, being vigilant, and getting in early, you will be able to make it through the process with minimal stress. Just think of how wonderful it will feel once it’s all over and done with – even if you do have to do it all again the following year!
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