8 Small Business Tax Tips Business Owners Need to Know
Small business owners know how difficult it is to run a business. 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 once you file.
Tax season is not fun for anyone, however, there are a few important small business tax tips business owners need to know. These tips are pretty easy, as long as you keep up on the them through out the year.
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 to work and plan with.
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 through the year and without fail. There are plenty of apps and business platforms like Quickbooks that can help you record business transactions 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 a 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 to the IRS
It is important to report all your earnings for the year, because the IRS will be looking at 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 designation 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.
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. Your accountant may be able to provide this service for you. 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 items to a consumer. However, net income is how much you have left over after all your expenses are deducted. If you file a Schedule C or Partner, no taxes are withheld from your business income. It would be wise to determine how much is your net income for the year to determine tax liability. You maybe liable for estimated taxes. If you can, remit payment for estimated taxes to avoid penalty.
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.
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 make tax time a bit less stressful.
