10 Tax Tips For Small Business
There are 10 tax tips for small businesses that can help make tax time a breeze. Tax time can be very stressful for small business owners but the following suggestions can make it go much more smoothly
- Find a competent accountant and/or tax preparer before the business opens. If the business owner intends to keep accounting records and file tax returns, it is highly recommended that they receive some training in how to do so. Many business owners do not understand the importance of and the amount of time involved in record keeping. Hire someone or plan how to take care of these matters as soon as possible.
- Keep records current. Don't wait until the end of the year or until tax time rolls around to "add everything up". It will take forever and business owners will not have a clear idea of how well the business is doing on any given day.
Keep track of records. File and organize receipts, bank statements, wages paid to employees or contractors, mileage records, etc. If contacted by the IRS for an audit, they may ask to see proof of expenditures and income.
- Deduct eligible expenses. We have all heard the expression that it takes money to make money. This is true in the world of business. Small businesses should take advantage of the ability to write off business expenses. A small list of potential business expenses include: internet, telephone, office supplies, legal and professional services, car and truck expenses, etc.
- Employ your children. According to the IRS, you can hire your children to work for you if you are a sole proprietor or run a partnership with your spouse. Kids under 18 do not have to pay Social Security taxes or unemployment taxes if they make less than $5,000 a year. Business owners can get a deduction, and the children don’t have to pay taxes.
If possible, defer income. If possible, have end-of-the-year payments from clients sent to you in January of the next year. That income would then be part of the next tax year. Lowering the amount of income and therefore lowering tax liability for the year.
Stay abreast of changes in tax laws. It is important to become aware of any changes in tax law that can effect the business in a negative way or in a positive way. Sometimes time is of the essence so please find a resource to read or a person who can provide periodic updates on these issues.
Find a software that helps save time. Yes, small businesses can start out using the shoe box method but who wants to add up all those receipts at the end of the year. There are many types of accounting software that can help small businesses keep track of income and expenditures. Many are relatively expensive and some come tailored to different types of businesses. Take advantage of free trials before purchasing to make sure the software fits the business's needs.
- Call the IRS if needed. Don't be afraid to contact the IRS if clarification is needed. The first resource to check for information should be the IRS.gov website. However, feel free to call the IRS for additional information. The IRS can be reached at 1-800-829-1040.
- Run the business and make money. All the mounds of paperwork and time needed for record keeping and tax planning can sometimes seem overwhelming. Don't forget that businesses need to make money. If the majority of time is spent in this area, think of ways to make the process more efficient and less time consuming.
Posted on: Apr. 29, 2010