Tax Season is Here! Survival Tips for Small Businesses
Your phone is ringing off the hook and your inbox is full of people wanting to collaborate with you. However…it’s tax season…and the accompanying paperwork takes priority. As a small business owner, you might be working 24/7, and while you love the work that you do for others, it’s necessary to pause and work ON your business rather than just working IN your business.
In a recent study, approximately 93 percent of small business owners reported that they’ve overpaid in taxes. Let’s make sure that you are not one of them! Here are some survival tips for approaching 2019 taxes.
Maximize Credits and Deductions
Your tax savings does not happen during tax season, but rather, at the beginning of the tax year. How do you organize and prepare for this? Find a consistent place to keep your receipts so you don’t miss any potential deductions. Take a moment from your inbox to reconcile your books and reflect on the past business year.
Set Financial Goals
What’s the big picture of your business? Now is a great time to reflect on your work and set financial goals. By doing so, you can create a plan for what you do well and what you can improve through the next year. Then take those goals the next step by incorporating them into your monthly budget.
Equip Yourself With a Bookkeeper or CPA
Keep more money in your pocket and less in that of Uncle Sam. A CPA is a great partner and investment to have in your business. With their expertise, they understand your business can help you with significant tax savings. In addition, they can navigate some of those confusing questions that arise with taxes help you answer questions such as:
- What type of entity should my business be?
- How should I pay myself?
- What are my state and local rules, sales tax and payroll tax concerns?
- Receive advice on 401(k) contributions, IRAs, HSAs, among other tax saving vehicles.
- Help set up quarterly estimated payments.
With having a CPA on your side, you have the assurance that your return will be accurate. As a small business owner, life is hectic enough and having this resource will reduce the number of tax hurdles you could face.
Utilize Tax Filing Software
If you’re not planning on hiring a CPA (which we recommend you do, so you can focus on what you do best!), avoid the headaches and invest in tax software. There are a host of notable computer programs available now on the web that can prepare and file your tax return online while providing the commitment of accuracy with your return.
So, What Can I Deduct?
There are a variety of expenses that go into running a business, such as employee salaries, rent, utilities, and a laundry list of other items. There are times that you can deduct more than you realize allowing you to stretch your financial resources. Common deductions included rent, supplies such as furniture and equipment, computers, copiers, and cell phones. You should also check with your CPA on the possibility of deducting health care costs for employees. Each deduction provides your company with a boost at tax time.
Don’t Forget About Startup Expenses
The IRS allows for small business owners to deduct an array of startup expenses before you open your doors or start working with customers. Each industry is different, but most can deduct investigational costs related to any research you’ve done about a product or market. Training is another deduction, as well as attending seminars, advertising and locating suppliers. Check with your CPA to see if any of your expenses over the past year could help with your final financial result.
Estimated Tax Payments
Whether you run a business with 20 employees, or if you are the only employee, the IRS requires that you make quarterly tax payments. This step is in place to help the burden of paying one large annual tax payment and instead, breaks it up quarterly.
What Is Your Tax Responsibility?
How your business is classified does affect your tax liability during the lifetime of your business. Each business structure, such as an LLC, sole proprietorship or partnership, varies on how they are structured, and they all provide benefits and limitations.
We recommend scheduling time weekly for you to work on the backend of your business. Don’t have time? Let the Brightwork team help you make your business succeed. We can take care of the details, from taxes and beyond, so you can work on the stuff you love.