Posted by Dennis Jao

Essential Tax Tips for Small Business

Essential Tax Tips for Small Business

Having a small business is the dream of many people, even though the intricacies involved in running a business is complicated. When you eventually add taxes each year, it gets tricky. This is why experts advise that you work with a tax professional or accountant such as DENNIS JAO to help prepare taxes and stay on the good side of the law. 

You might be at risk of losing money or other legal issues if you make financial decisions for your business without the input of an accountant. With this, we discuss best practices for small businesses on tax preparations.


  1. Work with an accountant. 

The job duties of an accountant are way more than financial statements and tax preparation. In selecting an accountant, look further than these two. 

It is essential to have an accountant that can stand with you all year round to keep tabs on income and expenses. This will go a long way to prevent a cash flow problem and also monitor the net and gross profit. 

An accountant should be on board right from the time of opening your business, not just a month or two, to the tax filing deadline. Accounting is primal to the growth and survival of companies. 


  1. Track and Claim all Income Reported to Uncle Sam

For every copy of the 1099-MISC form you get, Uncle Sam also receives a copy that allows them to match the income you report with what they receive. This makes it essential to tally every income reported to Uncle Sam with what is available on 1099 you get. 

Failure to do this will raise some eyebrows, and even if you do not get 1099 from a client, the income must be reported.

 

  1. Have an Accurate Records

The more detailed and accurate your records all year round, the higher your chances of having a correct and error-free tax return. If your record-keeping is inaccurate, you might miss out on tax deductions that would have saved you a lot. In the worst cases, you could be at risk for a tax audit. 

This makes it essential to have simple accounting software that can help you keep an accurate track of all income and expenditures. 


  1. Keep Business and Personal Expenses Separate 

We do not hope for an IRS audit, but if it happens and Uncle Sam's agent discovers that your expenses were mixed with the business, the IRS might start prying into your personal account for other commingled money. 

As a result, your business should have a different credit card and personal account, which should serve all business expenses.


  1. Know How Net Income Differ from Gross Income

For products that cost you a lot of money compared to what you charged for them, losing money is inevitable regardless of how many sales you made. Many times, small business owners do not account for the difference between their gross and net income. 

It might cost you $150 to manufacture your goods, and it was sold for $230. This leaves your gross income at $80. On deducting business expenses, however, the net gain could drop to $30. This makes it essential to know the value of your net and gross income.

  

  1. Manage Your Payroll

It is in your best interest to hand over your payroll services to another company, a reputable one. This will go a long way to save you time and money and prevent future issues. When you hire any company to handle the payroll service, they might cost you in the future. There could be issues like failure to remit payroll taxes. 

Cases like this put your business in a difficult spot for such taxes, and do not forget that Uncle Sam checks every quarter to ensure you are compliant with payroll taxes. 


  1. Keep Your Accountant in the loop Concerning Your Business Plan. 

A reputable accountant will give valuable insights on how to grow and move your business forward. With their guidance, you can know the right amount to contribute to your retirement account, decide if taking a bonus is a smart move or delaying it for a little while. 

With their insight, you will know if it is a smart move to buy a small space for your business or rent, which of these plans will save you money. 


FOR MORE INFORMATION ON HOW DENNIS JAO CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


THANKS FOR VISITING.

Dennis Jao
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