Tax day is just right around the corner, which means there’s a good chance that many of you have already filed and gotten them taken care of. However, if you’re like the majority, you’ve put it off because it feels daunting–especially as a small business owner. No one wants to give their hard-earned income to the government. Thankfully, there are a few ways to make filing easier and keep your money in your pocket.
Ensure That Your Small Business Structure Is Correct
Before you even begin your business, it’s important that you register correctly because each structure has different tax implications. Here’s a quick breakdown to make it easier:
- Sole Proprietorship – This is the most common business structure because it means using your name and social security number to conduct business. This means your business is not taxed separately.
- LLC – This is the second most popular business structure. If you are a single-member LLC, you are taxed the same as a sole proprietorship. If you are a multiple-member LLC, you can be taxed as a partnership or a C corporation.
- C Corporation – A C corp consists of shareholders, officers, directors, and employees. This means you pay taxes on a company level. Shareholders also pay taxes on any dividends received.
- S Corporation – Unlike C corps, S corps avoid double taxation by giving income straight to shareholders, who then report their income, expenses, etc., on their personal tax return.
Establish A Tax Calendar
While we all know of the looming tax day in April, creating a tax calendar helps you stay on top of important dates. If you have employees, you can jot down when you need to file W-2s or 1099s. A calendar can also be helpful to track when payroll deposits are due. To make life easier, the IRS has put together a tool that you can customize for your business needs.
Understand Small Business Tax Deductions
Tax deductions are your friends as they reduce your overall tax bill. One of the best ways to ensure that your deductions are correct is to check the IRS’s tax credit page.
Some tax deductions you can look out for include marketing expenses, business meals, the rent of your office space, any traveling done for work, the interest on a small business loan, and more. However, each of these deductions comes with a set of rules, so it’s important to research it before you deduct.
Hire An Accountant
Hiring an accountant may seem daunting (and expensive), but it’s one of the easiest ways to save money and simplify filing taxes. The more money you earn, the more claims you’ll have to file, increasing your chances of making a mistake.
Bringing on an accountant can be the one thing that differentiates you from an easy, stress-free tax return and a dreaded audit. If you’re unsure of how to find one, consider asking colleagues and family members. And, of course, don’t forget that CloudFriday helps with bookkeeping and accounting management.
Related: What’s The Difference Between A Bookkeeper And An Accountant?
Keep Up With Quarterly Payments
If you’re expected to pay over $1,000, you’re going to be making quarterly estimated taxes. In fact, before you were a small business owner, you were probably already doing this without even realizing it. Employers do so and take them out of your paychecks, so you don’t even have to think about it. Unfortunately, as a small business owner, this is something you have to be mindful of.
If you have a couple of years of experience under your belt, you can use these as an estimate. If you’re a brand new business owner, you can simply multiply your average monthly income by 12. If your estimate isn’t correct, don’t stress. They’re called estimates for a reason.
Stay Organized
Last but certainly not least, it’s essential to keep your books and records clean and organized. This is especially true if you hire an accountant who is going to be taking on taxes for you. Always keep your records and receipts. This helps you calculate business expenses and avoid missing income.
We can’t stress the importance of good accounting software enough. Whether you’re planning on doing your taxes yourself or hiring an accountant, having this software is an easy, affordable way to keep track of all things financial so there’s less of a chance a mistake gets made.
Final Thoughts On Filing Taxes As A Small Business
Chances are, tax season will always feel a bit overwhelming as a small business owner. However, with these six tips, you’ll be prepared and ready to crunch numbers as soon as the time comes. Stay organized, research possible deductions and other important lingo, and hire an accountant, and you will be finished filing in no time.
