Best Tax Advice for Small Businesses to Keep in Mind
Small business owners everywhere tend to dread tax time because it causes confusion and can mean that your business owes money to the IRS. If you are not an expert at filing taxes, you probably already struggle enough when filling out the paperwork and collecting all of the data you need.
If you are going to be filing your taxes again this year, then you need to keep the following mistakes and advice in mind so that you do not find yourself with a penalty letter in the mail.
Often, small business owners overlook an item or two that may seem small in the beginning, but these mistakes can add up to a large mistake. Whether you are crunching numbers or simply making sure you double check your return, you want to be cautious at all times.
A common mistake that leads to trouble is forgetting to include all of your business expenses. If you merge your business and personal banking accounts together, all of your expenses and deposits will become muddled and trying to sort this out at the last minute will make you scream.
Throughout the year, keep all business and personal items separate, that way, you are not trying to figure out what is what come the tax deadline.
If this is your first time filing your business taxes, you may not know that there are many deductions you may qualify for. Some small businesses overlook some of the smaller deductions that are available, which then leads to a higher tax payment.
You should always perform thorough research to see which deductions you qualify for. For instance, if you have a business vehicle, you may qualify for a mileage deduction. Many business owners do not even think to include their mileage in their deductions.
If you are having trouble determining what is available to you, speak with your local tax professional.
If you do plan on doing your own small business taxes, invest in a software program that will help you keep track of all incoming payments and outgoing payments. You can categorize payments by the type they are and flag overdue payments as well.
By being organized, you will be able to quickly see how much money your company made, how much you paid out, and more.
Never toss out your company’s payroll records because you WILL need them come tax time. For starters, you need to make sure that you are deducting enough federal taxes from your employees’ paychecks. If you are not, you may take a huge hit on your taxes and end up owing the money to the IRS.
ALWAYS hold on to past tax returns, paperwork, receipts, and expense sheets. You should keep this paperwork for a minimum of three years.
Holding on to your paperwork will help you if you ever do receive an audit from the IRS. Being prepared for an audit can be the difference between a headache and a smooth transaction.
Small business taxes are hard to do and they require a lot of your attention. If you either do not have the time to do them or you simply do not understand them, hire a tax professional to help you out.
Your tax agent will sit down with you and look over your business accounts and past returns. He or she will be able to claim deductions you may not have known existed and your agent will work to get you the most back on your return when possible.
Taxes for your small business must be filed and there is no free pass that is handed out to new or large businesses. Whether you complete and file your taxes yourself or you choose to hire a professional, you need to make sure that all forms are filled out correctly.
Remember, the most helpful thing you can do to prepare for your taxes is plan for them throughout the year and stick to it. You should never wait until the last couple days to crunch numbers and cram information.
