Tax Filing Tips for Small Business Owners
Although owning a small business has many advantages (such as flexibility, independence, and opportunities for innovation), it also comes with a healthy serving of responsibility. As a small business owner, you’re accountable to your customers, employees, contractors, vendors, and even the IRS. Filing taxes can be stressful, but by referring to the following tips from Project Victories, you can glide through tax season smoothly.
Know Your Deductions
As a small business owner, tax deductions can be extremely helpful. It’s important to take advantage of all the ones that are available to you (e.g. deductions for office expenses and supplies). If you run a home-based business, you may even be able to take home office deductions. These include the cost of everything your business needs in order to function, such as computer equipment, internet service, and even a portion of your rent or mortgage. You can also take special deductions for business-related costs that you incur during the year.
If you’re not sure which deductions you qualify for, reach out to a tax service for help. Be sure to stay organized and keep detailed records of your expenses. Making business-related purchases with a business credit card instead of your personal card can help you keep track.
Make a Plan
To avoid the stress of a surprise tax bill in April, try to determine your business’ overall outlook as early as possible. You can either put money aside each month or arrange for a line of credit with the IRS. Looking ahead, consider paying estimated quarterly taxes to distribute the burden throughout the year. This can be easier to manage than one lump sum per year.
Another key to your tax planning is the software you use to file your taxes. An online payroll provider like QuickBooks takes care of payroll tax filing for you and offers up to $25,000 of tax penalty protection if you make a mistake with your taxes. Other benefits of using a payroll service like QuickBooks include the ability to utilize auto payroll and same-day direct deposit.
Donate to Charities
If your small business had a lean year, donating to charities might be the last thing on your mind. However, there are many benefits to doing so for your business. You can usually take a tax deduction equal to the fair market value of the goods that you donate. For example, if you need to replace your POS system, you can deduct the cost of the purchase of a new one in addition to the value of the one you donated. Just be sure to get receipts or documentation for your donations.
If you choose to donate professional services, you can’t deduct the fees that you would charge for your time. However, you can deduct expenses you incur in the process of providing pro bono services (i.e. travel expenses or, in some cases, equipment costs). While these deductions are not large, pro bono services are a great way to support your community and promote your business at the same time.
Preparing and filing your taxes as a small business owner is a process and it helps to take small steps throughout the year to stay organized. You can put your business in a great position by working with trusted tax consultants, taking advantage of deductions, making a plan, and donating to charities. Taking these steps will help make the next tax season a breeze.
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