Taxes play an integral part in running any business. From federal income taxes and local and state sales taxes, to payroll and estate taxes – there can be numerous liabilities that impact cash flows negatively.
Small business owners must understand their tax obligations and be mindful of when they’re due if they want to reduce time and money wasted, plus avoid unpleasant surprises.
1. Get Organized
Filing taxes as a small business owner can be one of the most stressful experiences you encounter each year. There are deadlines, line items and forms to fill out; there’s much information that needs to be kept track of!
Organization is key to managing your company’s finances and staying on top of everything relating to paperwork. Don’t delay! Get organized as soon as possible for maximum effectiveness.
Digitizing receipts and records is another essential step toward staying organized, as this will make tracking expenses and claiming tax deductions much simpler.
Taxes can be a confusing subject for anyone, let alone small business owners. There are various taxes to keep track of such as excise and estimated, property and more.
An effective approach to tax season is being organized and flexible. There are various strategies available that can make this process simpler, from smart bookkeeping practices to potential tax credits for small businesses – one such being outsourcing your tax duties to an expert professional.
3. Be Flexible
Navigating Business Taxes can be a complex challenge for any small business owner, but with careful planning they can minimize taxes and save time during tax season.
Classifying your business as either a C corporation, LLC or S corporation can have a dramatic effect on its tax liability. According to Blake, it is crucial that it is classified correctly.
C corp businesses should file Form 1120 separately as well as report profits and losses on their personal tax return; while owners of an LLC that’s considered an S corp can claim relevant deductions on its return.
4. Keep Records
Maintaining accurate records of business income, expenses, and deductions is an integral component of sound tax planning. By keeping accurate records you can prepare and file accurate tax returns with reduced liabilities ensuring timely tax payments.
Many small business owners fail to maintain accurate records for their company or fail to keep them organized and contain relevant data – this can be disastrous at tax time!
Well-organized records can speed up an audit and prove to your accountant that your tax return is accurate, as well as protect you against creditors or any parties seeking to seize them.
5. Take Advantage of Tax Breaks
Small business owners should constantly keep an eye out for tax breaks that will provide long-term benefit, including deductable expenses that help keep money in their pockets and allow them to reinvest the profits back into their businesses.
One of the most frequently taken tax write-offs for small businesses is deducting their business interest costs, including loans or credit card interest costs associated with using them for business. Furthermore, any utilities used for the operation of their business (water/electricity etc) are also tax deductible.