It is very common for entrepreneurs to make mistakes while making business decisions. The biggest and most common mistake is when they try to write-off at the end of the year based on taxes only. This will always, without fail, have repercussions. Business decisions are based on a number of factors, which include taxes. Moreover, if you try to focus on where you are going wrong, the errors in decision making for a business are quite basic and easily avoidable as long as you are paying attention.
This article includes great, effective tax tips for entrepreneurs which can help you avoid the mistakes you might have made in the past. These tips will also help you maximize your earnings all while staying on the good side of the IRS.
Successful entrepreneurs are definitely born with the ‘independent’ attitude. They believe in doing everything by themselves – which is good until it comes to managing taxes. Managing taxes and other aspects of your business are two separate things. And if you are good with micromanaging your business, it does not necessarily mean you can do the same for taxes. In fact, this is one area where seeking professional help can come in handy.
Let professional tax preparers and accountants help you deal with the taxes. It is not a wise decision to go alone here. At this point, it is important to find a tax professional for dealing with your business taxes to write off your business’ year end on a successful note. You can find the foremost tax preparers at Richard Rogers. With considerable expertise and years of experience, we are proudly working with some of the best accountants and tax preparers in the state. Even if you are the most organized entrepreneurs, doing your own returns may not save you as much money as it should. Let a professional handle it and turn things in your favor.
Quarterly tax payments are based on estimation. One of the most common tax-related mistakes that first-time business owners do is to ignore these payments after receiving their first income. Since this is the first time they have earned money through self-employment, it is easy to forget to make these payments since people are used to having these taxes deducted from their paychecks before receiving them. Avoid doing that, even though it may seem a very obvious mistake.
Again, your tax preparer or accountant can help you calculate the estimated tax amount for quarterly payments.
First time business owners usually make the common mistake of mixing the two expenses together. While this may not cause a lot of trouble sorting things during the year, at the time of taxation, this could create a huge gap. Usually, this works against the entrepreneurs because such mistakes can jack up the amount owed to the IRS for tax calculations.
Your accountant can help you identify and sort these finances. Also, the amount of work and struggle you have to do to separate the two expenses will ensure you make this mistake only once. Also, if you are planning to do it on your own, avoid this mistake by setting up separate accounts for checking and credit card for your business.
As far as the retirement plan is concerned, business entrepreneurs often stick to the classic IRA. There are retirement options available with higher contribution limits and bigger opportunities than the classic IRA.
First of all, it is important to understand the difference between the traditional IRA and Roth IRA (which is also a retirement plan option available for you). Income limits is the biggest difference. Roth IRA has income-eligibility restrictions. Single tax filers must modify adjusted gross income of less than $131,000 to stand eligible for this retirement plan. On the other hand, anyone with earned income and who is younger than 70 years can contribute to the traditional IRA.
Other factors include future tax rates, tax incentives, withdrawal rules, and other extra consideration and benefits that set the two retirement options apart. Make sure you speak with your tax preparer to be able to make the right business decision.
Entrepreneurs would benefit from choosing S Corp or forming S Corporation taxation rules for their LLCs. As far as S Corp is concerned, you are required to set up a regular payroll system and keep up with monthly payments to the IRS. These offer bigger benefits as far as taxation rules are concerned.
When you choose the S Corp structure for your LLC, you actually become one of the employees of the company. The salary you will earn as a part of the company will be entitled for payroll tax deductions. This suggests that the profits earned by the company are only subject to income tax. Depending on the salary you set for yourself, you can end up saving a lot of money every year.
There’s no way you can run from taxes. You do not have to like them to fulfill your tax liabilities. If you cannot pay the amount of tax you are liable to, don’t forget to file your returns anyway – that’s the law.
This will allow you to pay back as much as possible the moment you have the returns in hand. Also, don’t forget to submit Form 9464 to setup an easy plan which you can keep up with as far as the payment schedule of your taxes is concerned.
If all of this sounds like a hassle, you can avoid it by connecting with us at Richard Rogers right now. If you are a business based in or around El Cajon, CA, let our highly-skilled tax preparers and accountants help you make the right business decisions for tax by clicking the link below. We will not only help you with tax calculations and save you as much money as possible, but also help you avoid the most common mistakes many first-time entrepreneurs make.
Rich Rogers Taxes and More