Small Business Owners: 5 Tax Tips for this Year

5-tax-tipsOwning a business is more than just clocking in and clocking out—this is your life (or like some great entrepreneurs say, their “baby”), and you want to make sure that every second and every decision you make towards your company, is the right one.

While many of these may seem a little obvious, they are all very commonly made mistakes. Many companies neglect to do their taxes properly, which results in penalties.

April is the dreadful month of taxes, (even the word “tax” is enough for people to shudder at its name) but by planning, and having the knowledge to get ahead of your taxes, you’ll avoid all of those mistakes that most companies make when starting off.

Be Up-To-Date

Being a business owner, you already know the importance of being ahead of the game; this is the same role you should partake in with filing for taxes. As an employee, the income taxes are already withheld from their tax return. However, since you are the owner, you must pre-pay your taxes through quarterly estimates. Like the tax payments example below, your company could be hit with higher interest rates, and a production halt.

Tax Payments

It may seem a little burdensome, but it’s incredibly important to be checking paystubs and monitoring the amount being taken out of your checks with your estimated taxes. It’s an easy step to overlook, because no action is required for you—it just happens! But when the time comes around to remit your taxes, your estimated tax payments are mandatory. This estimate must have the correct number, and if you don’t keep track, this can result in higher interest rates and penalties against your business. It’s important to have it paid on the right date, with the correct amount.

Track Reimbursable Expenses

Like most small businesses, you may be the one paying out of pocket for any of those quick supplies you need for your company, or taking a client out to lunch. However, if you don’t track and log these expenses, it may be overlooked by the time you can write them off as a reimbursable expense to the company. Even though this is a small step, it can add quickly to the overall confusion of doing your taxes.

Organization

Nothing is worse than trying to find that extremely important piece of information during tax season, and not being able to find it. Computers are great for storing incredible amounts of information, but if something out of your hands happens (like a computer crash or someone filing incorrectly), then you’re out of luck if you don’t have  a paper trail to fall back to. Keep a well-organized filing system with hard copies, and a plan B.

Misclassifying Employees

This mistake has been made more frequently since the IRS put in a new initiative for misclassification.  Business owners are now responsible for withholding payroll taxes from statutory employees (these are usually workers that rely on commission). Filing taxes incorrectly and under the wrong employee type can result in back payroll taxes.

Obviously, the best way to avoid any of these mistakes is by hiring an accountant for your business to track all of your finances for you—especially if this information is new to you. However, if your small business is just starting off, these steps are going to fall on your shoulders. Don’t sweat it; it’s not a difficult task. The more organized and up-to-date you are with any tax information, the better off you, and your business, will be.

Kirk Eason works with the London based tax accountants at Tax Agility.

 

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