Have you just started a new business or are you planning on starting one soon? Whatever the case, besides the daily management of your company and making sure you’re doing whatever possible to make a profit, you also need to make sure that you’re staying on top of your taxes.
Taxes are easily left for the last minute. However, if you want to avoid penalties and make sure to get the best results, understanding how to effectively file and prepare your small business taxes can actually be beneficial for the future of your company. Take a look at our top tips for handling your taxes as a small business:
Don’t wait until the last minute
First of all, you don’t want to wait until the last minute, as you may find yourself rushing to file your taxes and possibly making mistakes. Additionally, small businesses and self-employed individuals should be making estimated quarterly tax payments so that you avoid penalties.
You should be reporting income as you go and scheduling the dates for these quarterly payments to help ensure that you don’t miss any important details or payments that could get you in trouble. Tax software hosting with ProSeries & Lacerte can help to keep things organized and ensure your taxes are done on time and filed correctly.
Don’t lump your personal and business bank accounts together
Blurring the lines of your various expenses and transactions simply don’t bode well when doing your taxes. To avoid this, open separate bank accounts for your personal use and business use. If you want to deduct business expenses from your income, it’s a good idea to avoid mixing personal stuff in there that could take away from your credibility as a business.
Make sure to save money for your taxes
Paying taxes is a cost. It can be easy to get to the due date for tax payments mixed up and find yourself a bit short. This is especially true if you’re self-employed. To avoid falling short on money to get those taxes paid, make sure to set aside savings.
If it helps, set up a specific account for tax money or use a savings-oriented app like Qapital. While you can theoretically make payments on tax payments, it’s best to pay it in one shot if you can, both to avoid the debt and to keep things organized and taken care of.
Log those expenses
One of the most important things when filing and preparing taxes is going to be the expenses and the necessary documentation to prove them. This is paramount; so as you get your business running, make sure to come up with a way to keep track of expenses and documentation.
Whether you use a rewards app like Fetch, budgeting software, or go the old-fashioned route, just make sure you have the “proof” to justify expenses for everything from entertainment for business, travel, meals, charitable donations, health insurance, and start-up expenses or home-office if that applies to you.
Don’t forget that equipment needed for your business can get you deductions
If you need to purchase equipment for the type of business you’ve started or are starting, you can qualify for deductions. That is if the equipment purchases are less than $2 million. It’s important to remember this, as it can save you big time.
Check out tax credits your business may qualify for
From energy tax credits to disabled access credits and work opportunity credits, there are all kinds of credits that you could be eligible for, which could save you a lot of money. In some cases, credits can be more beneficial than deductions.
This list provides basic insights that can help you get the most out of your taxes. To make sure you’re getting the deductions you’re eligible for and saving any money you can, consider speaking with a professional who can help you understand the best practices for your specific business and situation, and explain any local tax laws or requirements.