In the United States, most small business owners spend at least 41 hours each year on tax preparation. Tax season can be overwhelming for business owners when it comes to the financial cost, the amount of time it takes, the changing regulations, and more.
Still, tax planning is one of the most important things you need to do as a business owner. Learning more about tax planning as a business owner can make the process less overwhelming!
Do you want to learn more about business tax services and how you can improve your tax preparation as a business owner? Keep reading this guide for the top seven tax tips to follow as a business owner!
1. Separate Business and Personal Expenses
Separating business and personal expenses is one of the most important things you need to do as a business owner. This is something that can quickly cause headaches for business owners, especially during tax season.
One way you can keep your expenses separate is by having a separate bank account or credit card for your business. This makes it much easier to track your business spending and will ensure that you report your business expenses accurately.
It will also protect your business if the IRS audits your company!
2. Keep Accurate Records of Everything
Next, you must keep accurate records of your business income and expenses. This is something that you should consistently do throughout the year. Otherwise, it will be nearly impossible to remember all of your earnings and expenses.
If you don’t have accurate records of your business income and expenses, this makes it difficult to maximize your deductions. It can also put you at risk of an audit from the IRS.
A simple way to record this information is to invest in accounting software. This will track all of this information for you to ensure accurate record keeping.
3. Understand Your Deductions
Many of your business expenses may qualify as tax deductions. These are often known as tax shields and will help you lower your business’s taxable income. When you understand what deductions you are eligible for, you can lower the amount of money you owe for your small business taxes.
There are many common small-business tax deductions that you may be eligible for.
You can also talk with your accountant or tax planning service to help you maximize your deductions.
4. Research Tax Credits
Not only are many businesses eligible for tax deductions, but you may be able to find tax credits as well. Tax deductions are essentially free money and are able to lower your tax bill.
Unlike deductions, tax credits offer dollar-for-dollar reductions to your tax liability.
Make sure you research the different tax credits available to small business owners so you can find some that you are eligible for.
5. Correctly Classify Your Business
It is also essential that you correctly classify your business when you are filing your tax return. If you don’t classify your company correctly, it may result in you overpaying taxes.
There are a few different business structures that you can choose from which will affect your day-to-day operations as well as your taxes.
For example, you can have a sole proprietorship. This is a great option for low-risk businesses but keeps you personally liable for the obligations and debts of your business as the owner.
Another common business classification is an LLC. This protects you from personal liability but often has a limited life. An LLC also pays a lower tax rate than a corporation!
There are also many different types of corporations that you can choose from.
Learning more about each of these types of business entities can help you make the best choice for your business when it comes to taxes and other benefits.
6. Prepare for Tax Season
When you file your personal taxes, it is easy to push them off and still have time ot get them filed. However, this is not the case for business taxes. There are many deadlines you have to meet and you must have all of your important documents updated and gathered.
If you fail to prepare for tax season throughout the year, you will have to scramble to get everything organized in time for your tax deadlines.
If you are filing an S corporation or partnership tax return, the deadline is March 15. If you are filing a personal or single-member LLC tax return, the deadline is April 15th.
Make sure you start preparing for tax season at the end of the year. This way, you can accurately forecast your taxes and have plenty of time to file.
7. Hire Professional Tax Services
Finally, you should hire professional tax services to help you with your small business taxes!
Small business taxes can take dozens of hours for a business owner and requires a lot of knowledge and expertise to file your taxes accurately. If you are not an expert in small business taxes, hiring professional tax services can save you a lot of time and stress.
They will help you file your taxes more efficiently and with fewer errors. Plus, one of the benefits of hiring tax services is that they can save you money and help you maximize your deductions!
Worried About Tax Resolution? Get Help With Tax Planning Today
As a small business owner, tax season can feel overwhelming with the many different rules and regulations you must follow. However, following these small tax tips can help you feel prepared and ensure you get the most out of your taxes.
If you need help with your small business tax planning, Basta+Croop can help! We provide everything from business tax services to accounting services and more.
Contact our team today to learn more about our services or to start filing your business tax returns.