Small businesses and taxes go hand-in-hand whether you like it or not. If you’re like most small businesses, though, you want to do whatever is possible to minimize your tax liabilities. This can be a lot of work and leaves room for many mistakes. As we gear up for tax season, it’s vital that you get prepared now to avoid headaches, penalties, and time wasted figuring out your taxes.
Filing taxes as a small business is no easy feat. Staying organized throughout the year is the key to a less stressful tax filing season. Categorizing your income and expenses and keeping copies of everything for tax time is crucial.
As you prepare for tax time, discover where you stand with each of the following.
Do you Keep Electronic Records?
In today’s day and age, keeping electronic records is vital. Not only is it easier, but it keeps you more organized. Just think of the time you’ll save not having to chance down individual papers. Choose a software program that imports your banking and credit card information automatically and another to file your important tax paperwork.
Is Your Business Structure Tax-Friendly?
Did you know that operating as a sole proprietor or partnership increases your tax liability? If you operate as an LLC, you may be able to separate some of the income, therefore decreasing your tax liability. With more flexibility, you are able to keep your gross income to a minimum on paper. It’s worth finding out if filing as an LLC will benefit your business.
Do you Know how to Minimize Your Employee Taxes?
You need employees to run your business, but they cost you money in taxes too. Sometimes offering employees more benefits, such as insurance, 401K, or education reimbursement is better. You still give your employees a valuable benefit but not at the cost of a higher tax bill.
Do you Know What Deductions you May Take?
Many small business owners don’t realize the deductions they are eligible to receive. A few of the most common include:
- Health care tax deduction
- Charitable contributions
- Business use of your home
Small business owners often overlook the most common deductions which can easily decrease their tax liability.
Do you Employ Anyone From a Disadvantaged Group?
If you employ veterans, anyone that is disabled, or anyone else in a disadvantaged group, you may get a tax break with the work opportunity tax credit. This federal tax credit can help decrease your overall tax liability.
The Reasons to Hire a Tax Advisor
The right tax advisor can help you with all of the above questions and more. A tax advisor can help you:
- Make sure you’ve received every deduction you’re entitled to
- Help you with an end of the year review to determine where you could make changes for next year to make your tax liability even lower
- Makes sure you submit your taxes on time to avoid unnecessary interest and penalties
A tax advisor can help your small business save money on taxes. Knowing what you need to qualify for each deduction, how to file your taxes and the ways to better set yourself up for next year are crucial to your business’s success. Getting organized, having proper advice, and ensuring that you take advantage of every deduction you are entitled to is crucial to your success.