By Valerie Jocums
Finally, your taxes are done. You can move on to all the other pressing issues of your small business that you put on hold to get your taxes completed. You can forget about taxes until next year.
Wait! Do you really want to go through all this difficulty again next year? Shouldn’t there be a better way than this horrible headache? There is. Unfortunately, it requires you to think about your taxes all year, and take some serious time right now to plan ahead.
However, once you get a few things set in motion, it will make tax season much more bearable from here on out. Here are five tips to help you stay on top of taxes year round, and make tax season go easily next year.
Once tax season has slowed just a little for your accountant, make an appointment for a post mortem. If you were less than organized, you might even take him out to lunch. Whatever type of appointment it is, you need to discuss with him what changes you should make for next year. Do you need better records? Are there deductions you might have been able to take if you had done things differently?
The other question to ask yourself during a tax post mortem is how you felt about your accountant. Do you work well with him? Is he willing to answer questions and explain tax law when you need it? If not, now is a good time to find another accountant who can help you grow your business.
Examine current accounting system
For many new business owners, their accounting system was far down the list of priorities when first setting up. They are more focused on growing their business. However, without a way to accurately track and view your financial health, it is hard to grow your credit score, let alone your business. You need a great accounting system for your business.
A great system will allow you to easily invoice clients, pay bills, and create reports on any financial aspect. Another part of your accounting system will include payroll and its corollary taxes as well as payments for benefits. Finally, it can help you track specific deductible expenses; these usually seem simple to track but often the IRS wants detailed, non-intuitive information. One example is a mileage log. If you have to drive a lot for your business, this can be a great deduction, but if you don’t track the correct information, you are out of luck. Other examples include office supplies and home office deductions.
By reviewing and possibly upgrading your accounting system and processes, not only will you save yourself time during tax season, you will have a better overall view of your financial health.
Plan tax year
By setting dates into your calendar now, you can be looking and planning ahead. If you have to pay estimated taxes, those due dates should be in there, as well as any quarterly meetings you have with your accountant. Monthly reminders for recording expenses are also great to put in the calendar. Make sure all tax deadlines are noted.
Other things you might want to plan out on your calendar include charitable donations that can be deducted and any large equipment purchases.
Stay on top of new laws
Nobody wants to add to their workload, but with a new administration there will undoubtedly be new tax laws going into effect. You should make an effort to stay informed about these new rules. Yes, you pay your accountant to do that, but you should at least have an overview. He can be in charge of specifics, but if something goes into effect and you don’t have a meeting for another six months, you might be missing out on a new deduction or miss a new rule that denies you one. Schedule time for yourself on a regular basis to review tax information on www.sba.gov or www.irs.gov.
For many small business owners, the tax side of the business is something they prefer to leave to professionals. However, by not being informed, you could be missing out on valuable information that might change how you structure your business or plan for spending. Every small business owner should know at least tax law basics and stay informed on new laws.
Implement tax-saving deduction
Finally, after talking with your accountant, look into additional ways you can reduce your tax burden. If you are past the sole-proprietorship stage, there are ways to save money on taxes that many of us former employees might not know about. This is where study and a good tax accountant come into play. A couple of these ideas include an accountable plan and employee benefits instead of raises.
An accountable plan allows you to reimburse your employees for expenses without including it in the payroll. This means your employees don’t have to pay income taxes on the amount, and you save company payroll taxes. Obviously, there are rules to this, but if you are often reimbursing your employees for travel and car expenses, it could save you money.
By adding benefits instead of increasing pay you are still increasing compensation to your employees, without adding to your or their tax burden. A good example of this is employers electing to pay more of the employee health insurance costs.
Most small business owners would rather not deal with taxes. It is always a frustrating and stressful time of the year. By being proactive and working on it throughout the year, small business owners can make tax time easier and probably even save themselves some money in the process.
Valerie jocums, originally a computer programmer, is enjoying a new career as a freelance writer. She loves to write about business, technology and health. When she isn’t mountain biking with her dog, practicing her public speaking skills, or reading, she is writing about everything she has learned. Follow her on twitter: @vkjocums.