Tax time is spinning ever closer, but you still have plenty of time to get your small business taxes in order and be able to enjoy a worry-free spring. Here I have compiled a list of the top twelve tax tips that will help you get your taxes done right and still have time to spare.
1. KEEP A CALENDAR.
Deadlines can sneak up on you. As a small business owner, you have a lot of bills and payrolls to juggle, so don’t let your tax deadlines fall by the wayside. Deadlines can differ depending on when your tax year ends and what sort of business entity you operate. Minimize penalties and interest by noting all necessary business filing deadlines on your calendar.
2. CONSIDER HIRING HELP FOR YOUR BUSINESS TAXES.
When doing business taxes, there is a load of overwhelming tax laws to deal with. The opportunity to make mistakes multiplies when you throw in all the variables involved in business finances, so to make things easier, I highly recommend hiring outside help.
3. THE BEST SERVICE STARTS NOW.
If you wait until the last minute to pull out your shoebox of receipts and shove them at your tax accountant, you are going to get some cold, dirty looks, and rushed service as well. Even the best accountant can make mistakes when he or she is forced to pull it all together at the last minute. You are reading this article, so why not start now? Gather your materials and get them in order. It’ll make things a whole lot easier, even if you don’t call your accountant for two or three more weeks (of course I’m not suggesting you wait that long). But if you take baby steps, you’ll have an easier time staying organized, both for you and your accountant.
4. FIRE UP THE COMPUTER.
My neighbor swears by the old pencil-ledger-and-calculator method, but I feel you can keep things much more organized and under control if you keep track of your income and expenses with a specially designed computer program such as Quicken. For a small investment, you can save yourself a great deal of time and headache.
Even maintaining a spreadsheet is preferable to piles of little receipts that can get way out of control. A computer program puts it all in front of you and makes it easier for you to check and re-check as often as you want, often catching errors that might otherwise have gone unnoticed. With taxes, as with all your finances, “organization” is the key word!
5. DO YOU QUALIFY FOR A HOME OFFICE DEDUCTION?
You may have the right to write off a myriad of business expenses you may not have even considered, such as rent, utilities, housekeeping, and supplies bought to keep your home office up and running. The deduction is a calculation of the expenses proportionate to the part of your home that is used exclusively for business. It can be quite a pleasant surprise when you see the results! Remember to consult a professional to ensure you write off the proper items.
6. HAVE ALL THE RIGHT PAPERWORK.
You can’t do your taxes if you don’t have all the correct paperwork. Your paperwork will vary depending on the sort of business entity you operate, be it an S corporation, C corporation, LLC, sole proprietor, or partnership. Check with your accountant to be sure you have the correct forms to match your business category.
7. MAKE COPIES.
It’s just good business sense. Xerox every single piece of paper regarding your tax returns, including everything you send to your state and IRS agencies. That way you have back-up documentation of everything. You never know what could come up, and you’ll always be prepared to reproduce a copy of any document that needs to be re-examined or re-filed.
8. REMEMBER YOUR RETIREMENT PLAN.
Who would you rather pay: yourself or the government? When you contribute to an IRA, you reduce the amount of income taxed by the government, and you set aside money for that glorious time when you get to give up the rat race and relax. Remember, you can contribute to last year’s IRA all the way up until April 15th, so don’t forget to pay yourself, too!
9. KEEP IT ALL.
I mean your documents, not your money… When it comes to your taxes, it’s a good idea to be a pack rat. You’ll have peace of mind knowing you can produce any document at anytime, no matter what questions may come up. You may need certain items for future reference for yourself or for your next year’s tax return. Whatever the case may be, always organize and carefully file away:
- Credit card bills and receipts
- Old checkbooks
- Bills and invoices
- Mileage logs and documentations
- Cancelled checks or proofs of payment (VERY important)
- Any evidence that supports deductions and credit claims on your tax returns
10. START PLANNING FOR NEXT YEAR.
I know, it seems like just getting a handle on this year’s taxes is enough work, but if you start thinking ahead for next year now, you’ll have a whole heck of an easier time when next April rolls around. Throughout the year, keep your taxes on your mind, but not in the way that causes ulcers. When making decisions for your business – such as purchasing office space, incorporating, or hiring extra help – consider the implications those changes may have on your taxes. Such careful considerations could help you make wiser, more successful choices for your business, improving your achievements in the long run.
11. DON’T PROCRASTINATE!
This is my message for everyone when it comes to any aspect of your finances. Procrastinating almost always costs you money. When you wait until the last minute and wind up rushing, from paying bills to paying taxes, you are bound to forget something. So in order to do things right, for any of these tips to help, you have to be ready to take charge of your taxes and do them in a timely manner.
12. REMAIN CALM.
I know this last tip doesn’t seem like much of a tip, but trust me, it is. Tax time can become hectic and put a huge strain on you, and any strain on you is a strain on your business. Following these tips helps everything run more smoothly, including your day to day business transactions, increasing your chances for success and helping you to enjoy the freedom of running your own business. Being a small business owner is a great challenge but in my experience, the rewards far outweigh the negatives. I wish you good luck and great joy!
© 2008 AmericanCreditFoundation.org®. Michael G. Peterson is a co-founder and Spokesman of American Credit Foundation, an IRS 501 (c)(3) non-profit consumer credit counseling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counseling services, and, debt management plans. For more information, and free consumer resources visit www.americancreditfoundation.org
This article may be freely distributed as long as the signature file and active link are included.