If you just started your home-based business in the last year, you may be apprehensive about your first time filing and paying small business taxes.
Never fear: these tips will make tax season easier for you.
1. Know Your Deductions.
You might be surprised at all the expenses you can write off with your home-based business. Your office, for example, is a legitimate business deduction. A few others include:
- Office supplies
- Computers or printers
- Business trip expenses
- Advertising or marketing
- Home office
So don’t be afraid to spend money on your business. It will help reduce your taxable income come April.
Related Content: Tips for Maximizing Your Tax Deductions
2. Don’t Overlook Your Charitable Donations.
If you donate money or items to local charities, these are expenses you can also write off. Consider finding a charity you as a business can donate to annually. Make sure to keep the receipt from your donation so you have it to show Uncle Sam.
3. Know Your Filing Status.
So many Americans list the wrong filing status, and overpay on taxes. That’s essentially giving the government a free loan until they return your money to you in April. The other issue is not paying enough in taxes throughout the year, which means you’ll be hit with a big tax bill in the spring. If you’re not sure what your filing status should be, check the IRS website.
4. Keep Pristine Records.
It’s tempting to trash all those annoying receipts, but if they relate to your business, hang onto them. In the case that you’re audited, you need proof that you did indeed take clients out for a big fancy dinner, and that receipt proves it.
Consider buying one of those receipt scanners and storing digital copies of all your documents on your computer.
5. Get Your Business Structure Ready for Next Year.
If you’re currently operating as a sole proprietor, consider incorporating or becoming an LLC for next year. With either of these business structures, you can avoid double taxation and realize other tax benefits.
6. Gather All Your Tax Documents.
By now you should have all your 1099s, W2s, and other tax forms. Make sure you keep them together so that when you’re ready to file your taxes, they’re easily accessible.
7. Make Sure Your Accounting Software Matches Your Records.
Take a moment to review the tax forms you’ve received in the mail and match them up to your accounts receivables in your accounting software. If there are any discrepancies, get them taken care of before you file.
8. Be Honest!
We’ve all heard horror stories of those that have tried to cheat the government. It never pays off. Be truthful in your filing. Know that if you are not, you risk being audited, which is a headache you do not want!
9. Allow Plenty of Time.
Now that you’re a business owner, filing taxes might take longer than it has in the past. With the tax deadline looming, it’s better to start sooner rather than later on the filing process. If you get stuck, call the IRS for help, or consider hiring a professional.
10. Hire a Professional.
And if you do find tax filing to be more than you want to take on, bring in a tax specialist or accountant for the job. They may be able to find deductions you didn’t know about, and have a better understanding of tax law than you do, making the process seamless.
Does tax time stress you out? Here are three tax tips to help you prepare for the season.
Outsourcing your taxes is a small investment, but it saves you a lot of time and stress of doing your taxes by yourself. The time you save can be used in other areas of your business. Plus you reduce the risk of making a mistake on your taxes which can cost you a penalty down the road.