No one likes to do their taxes, but it’s incredibly daunting for business owners. According to the Small Business Administration, three out of four small businesses pay more in taxes than they should because they don’t understand the tax code.
The good news is that there are a lot of resources available to help you, and by staying on top of your taxes throughout the year, you can make the process a lot less stressful. This article will outline some tips for keeping up with your business taxes so you can stay organized and compliant.
1. Keep good records.
This seems like a no-brainer, but keeping track of your income and expenses throughout the year is essential. This will make it a lot easier to file your taxes when the time comes. You can use accounting software, spreadsheets, or even a simple notebook to keep track of your finances.
Your records should include:
- All income, including sales, interest, and investments
- All expenses, including advertising, travel, and office supplies
- All asset purchases and sales
Many business owners also find it helpful to hire an experienced chartered accountant to help with record-keeping and tax preparation. They can offer valuable insights and save you a lot of time and headaches. When it comes to your taxes, it’s always better to be safe than sorry.
2. Know which deductions you’re eligible for.
There are a lot of deductions available for businesses, but you can’t take advantage of them if you don’t know about them. Do your research or consult your accountant to determine which deductions you can claim. This could include office expenses, travel costs, and home office expenses. You may also qualify for deductions if you hire employees, so it’s worth looking into.
Depending on your business, there may be other deductions available as well. Some industry-specific deductions include research and development credits, farming subsidies, etc. If you’re not sure what’s available, it’s worth finding out.
3. Stay up to date on tax law changes.
The tax code is constantly changing, and it can be tough to keep up. However, it’s essential to be aware of any changes that could affect your business. This may include new deductions, tax credits, or changes to how income is taxed. The best way to stay informed is to sign up for email updates from your local tax authority or consult with your accountant regularly.
Some changes may not affect you directly, but it’s still helpful to be aware of them. For example, if the tax rate for your area changes, it could affect how much you owe in taxes. If you’re unsure whether or not a change applies to you, it’s always best to err on the side of caution and seek professional advice. A tax lawyer can advise you on how the changes may impact your business.
4. File your taxes on time.
This one is pretty self-explanatory, but it’s essential to make sure you file your taxes on time. Whenever you receive a notice from a tax authority, read it carefully and take action immediately. Failure to do so could result in penalties, interest, or even legal action.
If you’re having trouble meeting a tax deadline, don’t panic. You can usually request an extension, but you’ll need to do so before the deadline. You might also be able to negotiate a payment plan if you cannot pay your taxes in full. Ask your accountant for advice on how to proceed.
5. Separate your personal and business finances.
This is another crucial tip for keeping up with your business taxes. Having a separate bank account and credit card for your business is essential. This will make it a lot easier to track your expenses and income. It will also help you avoid personal liability if your business is ever sued.
Some people do this by establishing a limited liability company (LLC). This is a business structure that can offer some personal asset protection. It’s not required, but it’s something to consider if you’re worried about personal liability. Talk to a business lawyer to see if an LLC is right for your business.
The bottom line is that taxes are a necessary part of doing business. By being prepared and staying organized, you can ensure that your taxes are filed on time and that you take advantage of all the deductions and credits you’re entitled to. An experienced accountant or lawyer can be valuable in keeping up with your business taxes. Always seek professional advice if you’re unsure about how to proceed.