Whether you are running an existing business or writing a business plan for a new one, you should plan to be proud of your profits — even during tax season. Filing business taxes isn’t something you can avoid, but it IS something you can prepare for in order to make the whole process easier when the time comes.
Everyone dreads tax season — from individuals to small business owners to large corporations. Trying to determine what qualifies as an expense or how to handle cash payments can create confusion. This can tempt many business owners to make faulty decisions without considering the results.
But owing taxes is a good thing. It’s a manifestation of a healthy business operating successfully. It means things are going right — which will only help you down the road.
So, let’s take the stress out of filing business taxes with these tax tips for entrepreneurs:
Hire a Tax Pro
Entrepreneurs can do it all — almost. When it comes to filing taxes, hire a professional. This is one area of your business that should be left to a pro, and the cost is worth it. An accountant can save you money by ensuring you’re not overpaying. They can provide accurate feedback on where you can make deductions.
Unlike Google, an accountant can customize their answers to your questions about your business. Taxes are really an area of your business you don’t want to be guessing about. When it comes to capturing all of your legitimate expenses, you want to ensure you don’t overlook the biggest areas. This one reason hiring a pro can make a huge difference.
While any great accountant can prepare your tax return, finding someone who is well versed in dealing with entrepreneurs is always a great idea.
To correctly deduct your expenses, you need to know what they actually were. The last thing you want is to be handing your accountant a box of receipts at year end, hoping they can make sense of it all. Keep notes of your business activities as you go throughout the year. It can be in an online solution like Xero, a paper journal or a spreadsheet in Google Docs. Just keep track of it.
A lot can take place in your business over the course of a year. When it comes time for filing business taxes, trying to go back and remember what happened months after the fact is nearly impossible to do accurately.
Not very organized? Programs like Mint and QuickBooks can work wonders for creative minds.
From disorganization to lost time to interest fees, procrastination hurts. The last thing your business needs is an eleventh-hour scramble for numbers. Instead, keep accurate records as they happen, and get the task done when it’s time. Whether you track using a simple spreadsheet or choose to use software designed for this purpose, tracking as you go will save you from a giant headache later.
If you know you have a tendency to put off handling these sorts of tasks, commit to a time once a month to reconcile your accounts. This way you’ve got everything ready to go when tax season begins. Set aside an hour — and just get it done!
Keep a Paper Trail
Besides the legal ramifications, accurately reporting your cash earnings creates an automatic paper trail that will prove invaluable down the road. Whether you wind up selling your business, applying for a bank loan, or reaching out to investors, your company will only look as good as you report it on paper. And if you’re purposely reporting yearly losses, you’re setting yourself up to miss out on potential investments or a buyout down the road.
Making the most of your business credit can be a good strategy for helping you keep a comprehensive paper trail. It assists you as your transactions are all accounted for in one place.
Play by the Rules
Remember, when it comes to your taxes, always play by the rules. Never try to stretch, bend, or circumnavigate the rules. It isn’t worth it, and it always costs you in the long run. You do not want to deal with an audit, and being dishonest can lead to discrepancies that red-flag you with the IRS. This can increase your audit risk. Being 100% truthful is not only the right thing to do – it’s also the easiest way to reduce the chance for negative attention from Uncle Sam!
Whether you’re still in the development stage of your business or you’ve been at it for years, when it comes to filing business taxes, working with a tax professional will help to ensure you claim everything you should.