With the tax-filing deadline creeping closer, this might possibly be one of the most stressful times of the year for a business owner with the ever changing tax codes. But, taxes don’t have to be a painful part of managing your business.
Here are 4 quick ways to make taxes a breeze for your business this year and in the future:
- Keep Complete Records for a Minimum of 6 years: IRS Studies show that poor records, not dishonesty, cause most small business owners to lose at audits and face fines and penalties. By tracking your actual revenue and expenses, it will become the basis for what you owe in taxes, as well as what you would need if you were audited. Also, to protect yourself, you should back-up your information with bank statements, receipts, and invoices. There are a bunch of online systems that can help to manage all of these documents – and the IRS accepts scanned documents as long as the details are legible. All of this information needs to be stored electronically or in a safe, dry place. If you are audited, generally they will go back 3 years, but it can be up to 6 if considered a “substantial understatement of income,” according to the IRS.
- Separate Business and Personal Expenses: In order to minimize mistakes and keep your sanity, it’s best to make sure that all business expenses are made through a business bank account either via check or debit card. That, plus keeping notes on what the purchase was for and how it affected your business, can reduce headaches when you are filling out your tax forms this spring
- Make Quarterly Estimates and Payments: When you worked for someone else, taxes were already withheld from your paycheck, but now that you are your own entity, the burden shifts. But how much do you pay? There are obligations based on Medicare & Social Security (the Self-Employment Tax) as well as income tax. Depending on how it nets out, you might need to pay each quarter. The IRS has created this handy flow-chart to help you to decide if you need to pay an estimated tax quarterly.
- Hire an Accountant: As you add more employees, more expenses, and more revenues, the complexity of your tax situation can escalate significantly. It can be completely worth the additional expense to have a professional guide you through the issues or penalties, or the intricacies of the different types of corporation filings and subsequent withholding information. Additionally, the fees associated with tax preparation are tax-deductible, so it’s even more worthwhile. If you don’t want to hire an accountant, make sure to use legitimate resources from IRS.gov or Turbo Tax so that you are looking at the most accurate and up-to-date information.
Learn about this and more when you download: The Ultimate Guide to Small Business Financial Management. Topics in this e-book include forecasting, managing cost, growing revenue within your current customer base. From PaySimple and Funding Gates