Taxes are a necessary evil for small business owners. The good news is that there are ways to reduce the burden of taxes, and by working with professional accountants, you can take the hassle out of small business taxes. In this blog post, we will discuss our top tips for small business taxes and how working with professionals can help you save time and money.
Tips for Handling Your Small Business Taxes
Running a business is hard. And adding on the complexity of filing taxes each year just makes things more complicated. The key to avoiding these complexities is to work with your accountant throughout the year! This means not just when you are preparing your tax return but also when you are making financial decisions for your business. Here are some more of our tips for handling your small business taxes.
Hire the Right Team of Accountants
Our first tip is probably the most important, and that is to hire the right team of accountants. Your account should offer you more than just preparing your financial statements and filing your taxes. Your accountant should also take the time to work with you throughout the entire year to track income and expenses, as well as to help you make sound decisions.
Take the time to ask around for recommendations or even check out online reviews. You want to be sure that you are working with professionals who have experience in small business taxes and can help you navigate the process.
Be Sure to Claim All Income That's Reported to the IRS
This one may seem like a no-brainer, but you would be surprised how many small business owners don’t claim all of the income that’s reported to the IRS. The IRS gets a copy of the 1099-MISC forms you receive so they can match the income you’ve reported against what they know you’ve received. Make sure the income you report to the IRS compares to the amount of income reported in the 1099s you received. This can lead to problems down the road, so it’s important to take the time to review your tax return and make sure that all of your income is accounted for.
Separate Your Business and Personal Expenses
Another important tip is to keep your business and personal expenses separate. This may seem small, but it can make a big difference come tax time. Be sure to open a separate bank account for your business and use it exclusively for business expenses. This will make it much easier to track your expenses and deduct them from your taxes.
Keep Detailed Records of Your Expenses
This ties into our previous tip about separating your business and personal expenses. It’s important to keep detailed records of all of your business expenses throughout the year. This includes receipts, invoices, and bank statements. This will make it much easier to track your deductions come tax time.
Understand the Difference Between Gross and Net Income
It’s important to understand the difference between gross and net income when it comes to small business taxes. Gross income is the total amount of money your business brings in, while net income is the amount of money you have after expenses are deducted. This is an important distinction because it can affect how much tax you owe.
For example, let’s say your small business brings in $100,000 in gross income. After deducting expenses, your net income is $50,000. The taxes you owe will be based on your net income, not your gross income. This is why it’s so important to keep track of your expenses throughout the year and to work with a professional accountant.
Classify Your Business Correctly
This is another small tip that can make a big difference. Be sure to classify your business correctly when you file your taxes. This includes choosing the correct tax classification, such as sole proprietor, partnership, or corporation. The classification you choose can affect the amount you owe, so it’s essential to get it right.
Our next tip for handling small business taxes is correctly managing your payroll. While this may sound simple enough, there is actually a lot that goes into submitting payroll.
Managing payroll isn’t just about making sure your employees are paid. It also includes withholdings for Social Security, Medicare, and federal and state taxes. Be sure to withhold the correct amount from each employee’s paycheck. You can use payroll software to help you with this, or you can work with professional accountants like Quantum to help manage your payroll and ensure it is taken care of correctly.
Take Advantage of Capitalization Rules
If you’re making improvements to your business, such as office renovations or new equipment, you may be able to take advantage of capitalization rules. This allows you to deduct the cost of these improvements from your taxes over a period of time. This can be a great way to save money on small business taxes, so be sure to talk to your accountant about whether or not you qualify.
Seek Your Accountant's Advice on Your Business Plan
Our final tip for handling your small business taxes is to seek your accountant’s advice on your business plan! Your accountant is there to help you with more than just filing your taxes. They should be able to help with things, including your tax strategy, and be able to provide any other financial advice they may have regarding your business. This can be a great way to save money on small business taxes and get peace of mind knowing that your finances are in good hands.
Let Quantum Accounting Handle Your Small Business Taxes
If you’re looking for help with your small business taxes, be sure to contact Quantum Accounting. We specialize in small business accounting and can help take the burden of taxes off your plate. We can also provide advice on your tax strategy and offer other financial services to help your small business succeed. Contact us today to learn more about our services!