If you run a small business, you’re used to wearing lots of different hats and handling many aspects of the business yourself. So when tax time comes around, you know you’ve got a lot to keep on top of. Here are eight helpful tax tips specifically for small business owners like you.
1. Start early and keep on top of it.
Whether that includes filing for an extension to give yourself the time you need, making quarterly estimate payments, keeping clear records throughout the year, or simply getting a head start after the first of the year, don’t let handling your taxes fall by the wayside, no matter how busy you get.
2. Communicate with the IRS when you need to.
Especially early on in starting and running your business, you may need more time to get things in order, or you may make a mistake. Those things are okay … as long as you talk to the IRS about them right away. Letting issues like extensions or mistakes go unaddressed can lead to a tax levy or other penalties, but the IRS is usually flexible and lenient as long as they know what’s going on.
3. Stay hands-on.
It can be easy to turn everything over to a tax professional and assume that your work is done—and sometimes that’s a huge temptation. Resist it. Yes, work with a CPA or accounting firm if you want to, but stay involved when you do. Check in with your tax professional(s) regularly and make sure you’re completely comfortable with their work.
4. Don’t be afraid to take deductions.
Many small business owners are hesitant to deduct out of fear of drawing the IRS’ attention, and end up paying a lot more in taxes than they need to. Remember that the IRS expects you to make deductions. It’s part of running a business. You need to do it carefully, yes, but you don’t have to be afraid of it.
5. Know what you can deduct.
On the topic of careful deductions, it will help you to know what different deduction your business can itemize. Valid deductions that may apply to your business include:
– Office supplies
– Other business-related travel expenses, including 50% of meals spent on business
– Startup costs
– Inventory management costs
– Some insurance premiums
Not all of these may be valid for your business, but better to examine them all than miss a few ones that are.
6. Be clear on how your employees work for you.
You may have full W-2 employees, independent contractors on 1099 pay, or a combination of both. Make sure your records are clear as to who is in which camp.
7. Be aware.
The legal and financial environment in which small businesses must work is constantly changing. Stay current with local and national tax laws and policies and prepare to adapt to them from year to year as needed.
8. Get good help.
You may be used to doing everything yourself, but you don’t have to. Taxes in particular deserve full attention, even when that attention isn’t exclusively yours. Whether you simply need advice or want to delegate the whole task, make sure you get the best help you can afford.
If you follow these tips and keep your wits about you, you and your small business should have no problem surviving tax season.