With inflation leading to price increases, a lot of business owners have to worry about money long before tax season even rolls around. When you have other things to worry about, the last thing you want to do is focus on taxes, but it’s simpler than you think.
Business taxes can seem daunting, but they don’t have to be. With these tips and a bit of time, you’ll be well on your way to never overpaying taxes again.
Read on to learn everything you need to know.
It can be easy to forget about tracking your expenses or to throw away all your receipts throughout the year, but you’re going to end up regretting it once tax season rolls around. Staying on top of your finances is going to make life a lot easier when you go to file your taxes.
You won’t feel rushed to track down all of your receipts and any payments or expenses you have.
If you work with a finance professional, they’ll have you send them your receipts throughout the year. But if you don’t, then it’s your responsibility to keep track of everything.
Understand Your Obligations
The more you understand about local, state, and federal tax obligations, the less likely you are to overpay.
You can find plenty of resources on both the IRS and SBA websites, including due dates, relevant tax forms, and even directions for filing your taxes. It’s important to remember that your business can also be subject to an audit by the IRS on any given year. So missing a due date, not paying your taxes on time, or neglecting to file at all could raise a red flag and ensure that your business comes under scrutiny.
You’re also likely to pick up tidbits on potential deductions and credits your business qualifies for along the way.
Take Advantage of Deductions and Credits
The key to lowering your tax bill is taking advantage of every single credit or deduction available to you. It’s important to know the difference between the two, though.
A tax credit works to decrease your payment by directly reducing the amount you owe. Some credits are even refundable, meaning that if you owe $300, but you end up qualifying for a $1000 credit, you’ll end up with a $700 refund. A tax deduction, on the other hand, works to decrease your payment indirectly because you’re taxed on a certain percentage rather than your dollar amount.
Tax credits are given by the government, as we saw during the pandemic. Keeping up with the government’s plans throughout the year can help you know what to expect when tax season rolls around, but there are also lists available to look at.
A few examples of tax deductions for small businesses include office supplies, office decorations, business trips, and any technology or other equipment that’s necessary for your business to run.
Know the Laws
Depending on the state your business is established in, you might be subject to some questionable laws. No matter how much they annoy you, though, they have to be followed. Failure to comply can result in extra fees (or worse) on your part, but it’s easy to avoid.
Laws differ for each state (some states don’t have income taxes), so it’s important to know them before tax season rolls around. How complicated your taxes end up being depends on a number of things like your business structure, number of employees, and the industry you’re in.
Working with a professional can help ensure you avoid any trouble, though.
Work With a Professional
While hiring a tax professional can sound expensive at first, it’s important to know that they can potentially help you save thousands in overpaid taxes. It can also help you avoid penalties and fines caused by simple mistakes.
For that reason alone, a lot of small business owners turned to accountants, tax attorneys, CPAs, or even specialized tax professionals that can help plan taxes throughout the year rather than at the last minute.
While tax planning services can cost more initially, they’re going to help your business not only stay out of trouble but also grow and thrive each year.
How Professionals Help
At Bennett Financials, our tax planning professionals help your business by conducting a full analysis, including things like:
- Deduction review and strategy planning
- Insurance review
- Legal entity optimization for LLC, S Corp, C Corp, and partnership
- Retirement options
If there are ways you can reduce your tax payment, we’ll help you find them. Our bookkeeping services also offer the essentials like quarterly estimated payments, quarterly 1-on-1s, and business and individual tax preparation. We ensure everything is set and that your return is filed correctly.
So, not only will you not have to worry about your taxes being prepared correctly but making those quarterly payments will feel a lot less painful. You’ll know you’re paying the minimum based on your business’s actual activity, rather than general estimates.
Stop Overpaying Taxes Today
While hiring a tax professional might be an investment up front, it’s one that’ll pay off in the long run. You won’t be stuck overpaying taxes as a business owner anymore, and you’ll have time to focus on the things that actually matter. Whether it’s scaling your business or giving your website that overhaul you’ve been putting off forever, you’ll have time to get it done.
Luckily, we’re here to help. Contact us to book a free consultation today.