In this guide, we’ll go over some ways to make tax season a breeze. Don’t worry about tax preparation.
Want to learn more? Keep reading.
- Find a Reputable and Experienced Accountant
As a business owner, you’ll want to find a reputable accountant. An accountant will provide financial advice and guidance, and they will help you prep your financial statements.
Yet, accountants will also work with businesses throughout the year. They will help business owners track their spending and income. They will also help to ensure you don’t end up with a cash flow issue.
Work with your accountant, not just during the tax season. A lot of small businesses don’t comprehend how critical accounting is for their business.
Look at outsourcing and working with someone like https://www.taxfyle.com/tax-preparation-outsourcing.
- Make Sure You Claim Income
The IRS will get a copy of the 1099-MISC forms that you’ll receive. They will match the income that you reported against what you received.
The income you report should match the amount of income reported in the 1099s. If you don’t, the IRS will see this as a red flag.
- Stay Organized
As a business owner, you should strive to maintain accurate records during the year. This way, you can make sure your tax return is thorough and correct.
If you don’t keep accurate records, you’ll end up losing out on deductions. Sometimes, business owners put themselves at a higher risk of an audit.
It would help if you looked at investing in essential accounting software. Accounting software will make it easier to track your expenses and income.
- Keep Your Personal and Business Expenses Separate
You’ll want to keep your personal and business expenses separate. If the IRS audits your business, they’ll examine your accounts.
Get a separate bank account. You should also get a different credit card for your business and use this card and account for your business.
- What’s the Difference Between Gross and Net Income?
It would help if you determined the main difference between your net and gross income. If your product ends up costing more money to make, you’ll lose money.
Make sure you understand the difference between gross and net profits.
- Don’t Forget to Classify Your Business
If you don’t classify your business correctly, you’ll end up overpaying taxes.
Figure out how you will classify your business. Is it a Sole Proprietor, Limited Liability Partnership, or a Limited Liability Company? All these different classifications will affect your taxes.
Small businesses should meet with a reputable accountant. Meet with your accountant to figure out how you should classify your business.
- Make Sure You Manage Payroll
Look at hiring someone to help you with payroll. The company that does your payroll should have a lot of experience and top reviews.
Some business owners might hire a lesser-known company yet end up with issues. The IRS will check each quarter to figure out if payroll taxes have gotten paid.
- Grow Your Business
A solid accountant will help you make a plan to grow your business. Talk to your accountant to figure out how you can grow your business and retirement fund.
Also, an accountant will tell you if buying a smaller space for your business or renting is wise.
- Keep Your Receipts
Make sure you have a system for saving receipts. You don’t want to throw away passes when you could use them for later.
Keep everything, so you don’t miss out on any deductions.
- Capitalization Rules
Do you need to buy a property or specific equipment? You might be able to get a significant deduction. Your accountant should understand the rules surrounding capitalization.
- What About Contributing to Charities?
A lot of charities were left in a rough place during the pandemic. Consider making a charitable donation. You will help a charity in dire need, but you’ll also reduce your taxes.
You can talk to your tax consultant to determine what makes sense for your particular business.
- You Could Hire Family
Do you have a partnership or a sole proprietorship where two parents are the owners of the business? If your children are old enough to work in your business, you could save on taxes.
You can employ your children legitimately. Once you hire them, you can pay them standard wages. You won’t have to give money up for FUTA or FICA.
- Use Tax Software
Even if you work with a financial adviser, you could still register for an online tax software account.
An online tax software account is an effective way to help you manage your taxes. Most of the time, you can calculate your tax liability with an online tax preparer. You’ll get an understanding of what to expect.
Use this software as a way to help you make last minute decisions. Do you need to buy new equipment? You could also put money into a retirement account.
Don’t Forget These Tax Tips
We hope these tax tips were helpful. Make sure you stay organized with your records and work with a reputable accountant. You might want to outsource these tasks.
Are you looking for more finance or business tips? Keep your business growing, and learn more by checking out our blog resources.