The thought of tax season can elicit some unpleasant emotions for small business owners. Even if you’re highly organized and on top of your game, handling taxes can quickly become a source of stress. Following a few key tips should make the process relatively smooth and less time-consuming.
Keep Track as You Go
Scrambling to get all of your tax information together at the last minute is a recipe for disaster. Ideally, keep up with all pertinent documents throughout the course of each year. When you break it all down, your documents will fall into two main categories — income and expenses. Consult the small business tax prep checklist from H&R Block for more details.
Use Technology to Your Advantage
There are several types of software and apps that can make your life much easier as a business owner. For instance, automated inventory management software and time clock software will help you get organized and minimize your odds of making needless mistakes. Staying on top of payroll is especially important because it’s one of the main reasons why small businesses are penalized each year.
It’s also smart to invest in a quality accounting software such as QuickBooks or FreshBooks because they’ll simplify many of the more arduous elements of accounting. This can save you some major time once tax season officially rolls around.
Know Which Tax Form You Need
There are multiple types of tax forms available depending upon the type of business you run. For instance, there is a form for sole proprietors, corporations, partnerships and so on.
Make sure that you choose the correct form and look it over carefully to understand the nuances. Check out this resource from the IRS for more information on how to go about filing and paying business taxes.
Know Your Deductions
It’s important to take advantage of any deductions you may qualify for. These minimize your expenses and maximize your overall annual revenue. Unfortunately, many business owners miss out simply because they’re unfamiliar with the vast amount of small business deductions available. This guide from Small Business Trends offers 20 examples of potential deductions.
Seek Professional Advice if Necessary
According to Wasp Barcode, “46 percent of small business owners don’t want to work with an accountant.” If there is any question in your mind as to whether you’ve done everything correctly, you should always consult a certified accountant.
Significant IRS penalties can occur even with the best of intentions, so it’s best to double-check. An added plus is that they may be able to offer advice to lower your tax bills.
Although tax season may not be your favorite time of the year, it can be fairly painless with adequate preparation. Getting organized is essential for taking care of taxes without ugly complications. Once you understand what you need for your business taxes, use your knowledge to simplify things in the future.