It is tax season again and many small business owners are clamoring to get their tax filings done. Of course, the number one question is how can I save money on income tax? About 70% of small business owners rely on tax experts to file their taxes and to deal with IRS issues. Whether you use a professional to file your taxes or not, there are things that you can do to make the process go smoother. Follow these tips for this tax season.
Keeping good records is one of the best ways to make the tax season easier for your business. If you have slacked off this year with keeping your records, spend a weekend to get everything together. Having all your expenses organized, and keeping good records is one of the best ways to ensure that you or your tax professional can take advantage of the available tax savings.
Keep all your receipts in one location for any equipment you invested in or any equipment that you had to retire this year. The more information you can provide about your business financial situation the better. Of course, keeping good records can also keep you out of trouble with the IRS. Tax evasion (even accidental evasion) is considered a white collar crime. Some white collar criminals get jail time even when it is their very first offense. Keep good records to protect yourself.
Don’t Leave Money On the Table
There is a surprising number of small business owners that are not taking full advantage of tax breaks and credits. Whether it is out of fear that the IRS will wind up auditing them or they just do not realize their eligibility, there is a lot of money that is being left on the table.
Let’s say your business sponsors a little league team. You may be aware that you can deduct the cost of their uniforms, but may not be aware that you can deduct the cost of your volunteer hours. There are many ways you can earn a tax credit that you may not be taking advantage of.
Work closely with your tax professional or do the research yourself to ensure that you are taking every credit and deduction that you can. Of course, make sure you have all the proof to back up your claim.
Brush Up On the Small Business Tax Laws
There were a lot of changes to the small business tax law recently that may affect your business. Brush up on the new laws to learn how they will impact your business before you file. Doing the research yourself whether you have a professional file your taxes is important. It is important that you understand your tax liability and responsibility. If a mistake is made in the filing, ultimately it will be your responsibility to correct it. Learn what you are dealing with to ensure you are doing things the right way.
Use the Available Technology
Even if you are using a tax professional, you should be checking your tax situation long before you hand your paperwork over. There is a ton of free tax software that you can use to mock up your taxes for the year. This will give you a good idea of what you can expect when your actual taxes are filed.
Doing this little practice run can enlighten you to how much tax you potentially owe and put you ahead of the power curve by putting money to the side to pay your tax bill. It is always better to know ahead of time at least a ballpark figure of what you will have to pay.
Prepare for Next Year
While you are reviewing all of your tax prep for this season, start planning for next season. What you do this year will affect your business taxes for next year. Consult with a financial planner to come up with a strategy for next tax season now.
Planning ahead and staying organized is the best strategy for every tax season. Get the ball on the roll early and next year you will not have to worry about tax season tips you will be ready.