The best advice anyone can give you with respect to small business taxes, is to keep them in mind throughout the year, and not just at tax time. Don’t let your receipts, invoices and other financial paperwork be stacked up in a disorganized manner; keep track of them as they come in nd file them accordingly, this will make life much easier for you and/or your tax professional when it does come to tax time.
Here are some other tax planning tips and snippets of advice that might come in useful if you’re the owner of a small business:
- It can never be too early to get your tax preparation head on:
Try to stay one step ahead of the IRS when it comes to your taxes, by thinking about how you will be planning them, well in advance of their due date. Set up an interview with your accountant before the end of the year to help you establish the complexity of your taxes this time around, and to see whether you might need the help of another tax professional. They will be busy at tax time, so leaving this too late may mean that you don’t get the help that you need.
- Choose between the cash or accrual method of accounting:
If your business prepares its own tax forms, then you may choose the cash method of accounting as it is generally the simplest. However, the accrual method of accounting also has advantages, such as the ability to match expenses and revenues, as it focuses upon reported income and not just the cash that your business has received. If you’re unsure, you should seek help and advice from a tax professional.
- Understand which tax forms you will need to file:
A lot will depend on the structure of your small business as to what tax filing requirements you must fulfil; schedule C of your personal tax return may be applicable if you are the sole proprietor, whereas LLC’S (Limited Liability Companies) that are often formed to keep business and personal assets separate, may require separate tax returns. You should also check local and state requirements prior to filing, to make sure that you have enough time to collate the right data in time for the filing deadline.
- Look into whether you qualify for tax credits:
Taking advantage of any tax credits that your small business may qualify for requires some forward research and planning and cannot be done close to the filing deadline. Each credit has a different set of requirements, and these can change frequently, so check with your local tax professional to ensure that you’re getting everything that might be owed to you.
Planning the taxes for your small business need not become an issue provided you start thinking about it early enough, and that you get professional help and guidance. Leaving tax preparation and planning until weeks or even days before the deadline, will only mean that you may miss out on entitlements and deductions, and could face costly penalties if a deadline is missed.