7 Tax Tips for Small Business & Entrepreneurs
One of the best ways for a small business to build its revenue and stability is to be smart about taxes. Lowering taxes and making the most of deductions can really make the difference between being in the green or red. Staying organized, having your paperwork in order and knowing about deductions and penalties mean there are few surprises. The following tax tips can help any small business find success.
1. Receipts, Receipts, Receipts
A strong paper trail is important for any small business. You have to know what you spent and on what. Having receipts ensures you know when money is coming and going out of the business. Additionally, a business may be audited, which means a thorough review of receipts. Take some time to invest in a filing system and experiment with the different apps and software systems for this.
2. Track Expenses
Make sure you have a system for recording any and all expenses. It will also help to make a note of things so you know why there was an increased expense one month and not another. If you want to write off expenses, you have to have the documentation. Additionally, there is software that can help you track, organize and even find deductions and tips come tax season. Using technology is smart because it automatically calculates things, which lowers the possibility of a mistake.
3. Deductions Are Everything
There are many types of deductions, and it is important to try and make the most of them. For example, if you run a home office, you may be able to deduct some of your utility bills and insurance. If you use your personal car for the business, you may be able to deduct gas. Another useful deduction is if you invest in accounting software or office supplies. Other common deductions for small businesses include business meals, depreciation, moving fees and professional development or education like webinars and trainings.
4. Tax Software
Even people who are scared or resistant to computers and technology can use tax software features. Today, such products as Quickbooks and Turbotax make it easy to track expenses, track profits and even keep track of employee data. This saves a small business owner a lot of time, energy and stress. A little data entry is all it takes to stay up-to-date for tax season. With the click of a button, you have all of the information you need to build the business.
5. Quarterly Estimates Protect You
Do not wait until March or April to start your tax season planning. If you do this quarterly, there will be no surprises. If you end up owing money, you can create an installment plan so you do not deal with major penalty fees. You can consult with an accountant or financial advisor, or you can even create some estimates using tax software.
6. Loved Ones Can Help
When you’re starting a business, think about asking friends, family and loved ones to help. They may have advice on financial advisers or accountants, or they may be willing to work for you. This saves you on labor costs and it can really cut back expenses. Your community may even have connections that make it easier to invest in office supplies, products and equipment. Speak up so you can take advantage of your loved ones’ connections and expertise. For example, they may have a relationship with a vendor that could save you 5 percent, or they may be willing to help you with a large order, doing everything from packing to shipping the items. Asking loved ones for help and advice is especially important if you want to cut costs or are just starting a business.
7. Understand Tax Penalties
You may have to pay tax penalties if you are late filing your taxes, do not pay on time or have made a large mistake. Do not suffer in silence. Instead, communicate and see if there are payment plans or penalty relief options. You may have made an honest mistake, gotten in over your head or had an emergency. Explain yourself and you may be able to figure out a win-win solution for all involved parties.