Tax time is a dreaded yet necessary event for all business owners. Beginners in the field are likely to find themselves more confused than ever, especially with the many tasks they need to accomplish to make their ventures succeed. Yet, with the right tools and knowledge, business owners like you can make tax time a breeze, and even stay ahead of your taxes throughout the year!
In this post, we’ll give you tips on how to stay ahead of your business taxes. You’ll realize that taxes aren’t that confusing after all with proper knowledge, expert assistance, and help from key software. So read on, and learn how to stay on top of your taxes.
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Planning is Everything
Your planning begins by brainstorming and choosing what type of business you want to register as—Sole Proprietorship, Partnership, Limited Liability Company, or a Corporation. Your choice will define your tax implications later.
It also pays to set up your tax calendar to take note of tax deadlines and plan when you should be preparing your income taxes, payroll taxes, tax returns, self-employment taxes, capital gains taxes, and other small business taxes you need to pay.
When it comes to managing your finances, tax planning for the year is a must. Gather any data you have from past tax seasons and check for ways you can lower your taxes while maintaining efficient business operations. Run budget simulations and answer your “what-ifs” during this time.
Find Ways to Lower Your Taxes
Although many small business owners find ways to lower their business taxes nearing the end of the year, you can do these throughout the year:
- Utilizing Section 179 to deduct the full or depreciating amount of office supplies and equipment.
- The 401(k) encourages employees to save for retirement by making their savings deductible from their taxable business income.
- Up to 60% of the amount you donate to charitable institutions can be deducted from your income.
- You can prepay all expenses for the coming year to give you lower tax payments for the following year.
- Payments moved to the next tax year can give you tax relief in the present year.
Switch from Spreadsheets to Software
Spreadsheets have been a reliable way to store data and generate reports for the longest time, but this method is time-consuming, more prone to human error, and susceptible to data breaches. Now that there are automated and accurate tools that can generate the same output in a shorter amount of time, it is time to make the switch.
Having bookkeeping and accounting software ensures data accuracy because of minimal human interference. Your data will also be protected by cloud-based security. Once your accounts are integrated into the software, it can automatically acquire transactions and categorize them. As a result, you can generate reports anytime, especially during tax season.
Streamline Data Gathering Processes
Graduate from manual inputs and maximize these different ways to streamline your financial data gathering process:
- Invest in software like Hubdoc and Dext that automatically convert images into data, so you do not need to input documents and receipts manually.
- You can also use tax software like Taxjar, Taxomate, and Avalara that are readily updated with the latest tax laws and local regulations. With these software, you’ll get accurate tax computation immediately and be able to declare the right taxes.
- Integrate your bank, credit cards, and other financial accounts into your accounting software to track your income and expenses automatically.
- Ecommerce for Amazon sellers or other platforms can link the data they have to their main accounting software for information consolidation.
Stay Informed and Updated
Although many tax software automatically update their system when changes happen, it also pays to stay updated. Subscribe to news and updates from the Internal Revenue Service, and invest extra time in getting to know how taxation works in the area you are operating in or wherever your customers are.
You can manage your business finances better when you maximize the data you gather by generating financial reports regularly. Seeing the big picture of your finances will help you decide whether you are on track with your financial goals or if there are areas in your business you need to work on. Analyze better by creating comparative monthly, quarterly, or annual reports.
Work with Experts
Taxes aren’t something to gamble with, and you need to get it right every time, as tax departments take inaccuracies or missed deadlines seriously. Your business can go under the microscope through audits, and you can suffer the repercussions much later.
With that, it wouldn’t hurt to hire an accounting firm and seek help from a proper tax advisor, especially since business owners like you have a lot on your plate. Here are some of the advantages of partnering with experts:
- They have complete knowledge of tax laws.
- They have expertise in operating different financial software.
- They can keep your books orderly and updated.
- They’ll be able to integrate software into your main accounting system.
- They can make sense of data through reports.
- They’ll give you insights and financial advice.
- They will ensure your tax reports are accurate and that you pay on time.
Stay Ahead of Your Business Taxes
Tax season can be daunting, but it doesn’t have to be. Planning ahead and enacting some strategies to lower your taxes can make the process a lot less stressful. Additionally, using software to help manage your data and staying informed on updates and changes can make filing a breeze.
You also have the choice to delegate the tedious task to experts. They are well-versed in bookkeeping, ecommerce sales tax, accounts payable, forecasting, payroll, and everything else accounting and bookkeeping-related. With experts, your business finances will be in good hands and you can ensure that you remain compliant on tax laws. Do these tips altogether, and you’ll have a great chance of staying ahead of your business taxes.