Tax season is the most stressful time for many business owners. There are so many things to keep track of, and it’s easy to make a mistake that could end up costing you money. Keep in mind that failure to file your taxes or making mistakes in the process will cost you thousands of dollars in fines and penalties.
Unfortunately, many small business owners don’t know how to file their taxes or handle their business finances. If you’re not sure what to do, don’t worry.
Below are 7 important tax tips that every small business owner should know.
1. Always Keep Good Records
This may seem obvious, but it’s essential to keep track of all your business expenses throughout the year. Having good records will make it easier to file your taxes and avoid any penalties.
When you start tracking your finances, it’ll be easy to know which type of taxes you owe the IRS. Depending on your industry and type of business, you may owe the following taxes:
- Employment taxes
- Excise tax
- Estimated taxes
- Income tax
Keeping a good record of your expenses is also part of excellent financial management.
2. Know What Deductions You Can Claim
There are a lot of deductions that business owners can claim, but you need to know what they are. Common business deductions include office supplies, travel expenses, and business meals.
3. Don’t Procrastinate
Procrastinating will only make the process more difficult and increase the chances of making mistakes when you file your business taxes in a hurry. Get your taxes done as soon as possible so you can avoid any unnecessary stress.
4. Separate Personal and Business Accounts
It’s essential to keep your business and personal finances separate. This will make it easier to track your business expenses and file your taxes correctly.
Mixing your personal and business finances can lead to confusion and can cause you to miss important tax deductions.
5. Take Note of Deferred Tax Liabilities
If you have any deferred tax liabilities, make sure to take note of them, as it’ll increase your tax bill. Deferred tax liability is an amount of money that you owe in taxes, but you don’t have to pay it right away.
For example, if you purchase equipment for your business, you can defer the taxes on that equipment until the following year.
6. Hire an Accountant
If you’re not comfortable doing your own taxes or don’t have the time to do them yourself, then it’s a good idea to hire an accountant. Accountants are experts in tax law, and they can help you file your business taxes accurately and on time.
7. File an Extension
If you can’t file your company taxes on time, you can always file for an extension, which gives you additional time to file your taxes. This will help you avoid late penalties.
Get Your Business Finances in Order Before Tax Season
Are you dreading the tax season? Small business finances can be challenging to manage, especially during tax season. However, following the above tax tips will help make the process a lot easier.
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