Small business owners know how difficult it is to run a business. And this time of year it gets even more challenging. It is tax time once again and small businesses need to file. Are you ready?
By Michael Zhou
Tax season is certainly not fun for anyone. You have to get all your documents together, fill out paperwork, and hope you got it right to get some cash back in a few months. With the government shutdown, it could even be longer until business owners see a return.
There are, however, a few important small business tax tips business owners need to know. These tips are pretty easy, as long as you keep up on them throughout the year. Let’s dive in!
1. Make Tax Season Year Round
This probably sounds a bit insane. Why on Earth would you want to max tax season year round? However, staying on top of records and documents throughout the year can make actual tax season easier if you have an accountant work with him or her throughout the year. You can also partner with small business tax preparation professionals online.
2. Record Everything
Having documentation of everything is very important for any small business owner that wants to make tax time easy, as well as get a big return. Receipts, invoices, bank statements, and more all need to be recorded properly throughout the year and without fail. There are plenty of apps, like Expensify, and platforms that can help you record things like receipts efficiently.
3. Ensure Business Is Separate From Personal
If your small business gets audited, you may be in for an audit. That is not good. And if you get audited and the IRS finds personal expenses in your small business records, you are opening up Pandora’s Box. The IRS can then begin looking into your personal accounts. You must keep them separate. Use separate bank accounts and credit cards for your business.
4. Report Everything tothe IRS
It is important to report all your earnings for the year, because the IRS will be lookingat all the 1099-Misc forms of your business and comparing that number with what you reported on your tax filing. If the two don’t match up, you may get audited.
5. Is Your Small Business Classified Correctly?
The classification of your small business is the LLC, Sole Proprietor, or Corporation designator you chose when you opened your business. If you do not classify them correctly, you could be losing tax return money. If you are not sure if it is classified right, talk to your accountant, or if you don’t have one, go to your bank and talk to the business branch.
6. Make Payroll Management A Priority
Are your payroll taxes being remitted correctly? This is a good time to ask. If handling your small business’ payroll is challenging and too time consuming, outsource it to a payroll company. This ensures your payroll taxes are getting taken care of the correct way. This is important, since the IRS does quarterly checks when it comes to payroll taxes. That’s right, every quarter.
7. Understand Gross and Net Income
If you are a small business owner and you do not know exactly what gross and net income is, you need to know. Gross income is your profit after selling an item to a consumer. However, net income is how much you have left over after all expenses are deducted.
For instance, if you sell a product for $25, but it is worth $10, your gross is $15. But the net profit could be $5 after business expenses are taken from the $15. Knowing the difference between the two will help you price effectively, and allow you to grow your business profits year-over-year.
8. Revisit Your Annual Earnings
As business owner, you need to make some difficult decisions when it comes to your annual earnings. Talk with your accountant to decide how much you will send to your retirement fund, if you should take a bonus, and other considerations. This can affect your annual tax filings and how much your business may owe, or get back.
Wrapping Up . . .
There are certainly a lot of small business tax tips out there. The above are just a few small business owners need to know in order to keep their businesses safe from the IRS and earning a nice return. Stay on top of your records throughout the year and mae tax time a bit less stressful. Do you have small business tax tips? We want to hear from you
Michael Zhou is a Senior VP of Business Intelligence Development and has assisted the Fortune 1000 company with expertise in the web as a whole, including ground-zero marketing efforts that benefit both consumer and vendor. He is also contributor on Esprittoday.