Running a business is tricky enough without the complexity of filing taxes every year. Tax time always sends business owners into a frenzy. The pressure of sending tax returns to the governing agency for compliance review can bring out anyone’s nerves. However, we have tips to ensure you’re on top of it this year. This article will explore seven expert tips you can implement when preparing taxes for your business. When you follow these tips, your taxes will become much more organized.
Eight Expert Tips for Tax Preparation
When it comes to tax preparation, these eight tips will ensure you’re adequately prepared.
- Separate Personal and Business Expenses
Business owners usually struggle to separate work and life. This is most common among small business owners. This is because their work is their life. However, this pitfall can become problematic when you’re filing taxes.
Mixing business and personal expenses doesn’t just complicate your accounting; it also increases the risks of the IRS disallowing some business expenses because it seems you’re operating as an individual. It’s essential to draw the line and use separate bank accounts for your business. Although it can be difficult to maintain this divide, you can do it if you put your mind to it.
- Gather Your Business Records
Doing this becomes easier when you seek small business accounting services from local bookkeepers. However, if you’re maintaining your financial records, it’s essential to get to this early. Be prepared to spend a bit of time on this because it needs to be accurate. It will be easier if you’ve kept up with bookkeeping tasks throughout the year.
You can also seek a virtual bookkeeping service to create the records and have them ready. If you’ve let the bookkeeping duties slide while focusing on other parts of your business, this will require much work. On the bright side, you can begin looking for a remote bookkeeper to assist you with the process today.
- Identify Credits and Tax Deductions
A business income tax return differs from an individual tax form. Therefore, it’s essential to give yourself plenty of time to sort, find and calculate all the possible deductions and credits available. Tax deductions and credits can immensely reduce your tax burden; that’s why you need to pay careful attention.
You should know that IRS also pays careful attention to these deductions due to the creativity of unscrupulous business owners. There are items you should pay careful attention to, and some of them include business mileage, travel and entertainment deductions, home office deductions, and small employer health insurance tax credit. You can also include disabled access cards and charitable contribution deductions.
When calculating these business deductions and credits, take your time to get the numbers right. You also need to prepare the necessary documentation to support them.
- Hire the Right Accountant
If you run a small business, chances are that you don’t specialize in tax preparation. Most businesses do not know the importance of accounting for the survival and growth of their business. Therefore, they ignore hiring an accountant right off. It is worthy of note that you don’t need an accountant on staff full-time. That’s why outsourcing bookkeeping services to a back-office outsourcing company might be the best option for you.
The right bookkeeper will not only help you prepare your taxes but also educate you on how to align your business finances. Apart from financial statement preparation, your accountant can also work with you year-round to track your spending and income. Their goal is to monitor your net and gross profits and ensure you don’t have a cash flow issue.
- Look at Last Year’s Return
Everyone will tell you to keep the tax return from the previous year. However, we’re here to tell you to keep them and use them when preparing your taxes. The tax returns from the previous year are a valuable piece you can use to get this year’s taxes in order. It is a resource you can use as a roadmap for filing taxes this year. You can reference it when necessary and compare it with this year’s tax returns.
The previous year’s tax returns provide you with the framework for the next year’s return. You can also use this resource to measure your business finances year after year and improve your business.
- Classify Your Business Correctly
Failing to classify your business correctly can result in higher taxes for you. Whether your business is a limited liability company, an S Corporation, a C Corporation, or a sole proprietor will affect your taxes. Consult with your accountant and attorney to determine the right classification for your business.
- Deduct Estimated Tax Payments
Depending on your income and business type, chances are that you made little business tax payments throughout the year. Small business owners must make estimated tax payments throughout the year to cover their estimated burden. Other businesses are expected to make quarterly tax payments. When filing taxes, ensure you deduct the money already sent to the IRS for tax payment. This ensures that you don’t pay more than you owe.
- Review Your Tax Forms
If you outsource your tax preparation to a bookkeeper for a small business, you’ll be the second set of eyes on these tax numbers. Be sure to review the norms and forms prepared for you before filing. Bookkeepers can also help you check the numbers on the business forms you used to prepare your tax forms.
How The Edge Capital Can Help
You can’t file your taxes if you don’t have the right numbers. The wrong numbers could cause complications for your business and cause issues with the IRS. That’s why accurate and up-to-date books are crucial. At The Edge Capital, we offer excellent bookkeeping services to ensure a seamless and organized tax filing process. We’ll help you update your bookkeeping, organize records and prepare financial statements to make your tax filing easy and quick. We’ve got you covered at all times and will help manage your finances to optimize profits in your business. Contact us today for a seamless tax preparation process.