Small Business Smarts: Top Tips for Paying and Reducing Taxes

Starting your own business is great. Something that you might not like having to do so much is the dreaded tax report. Luckily there are multiple resources out there that will not only help you understand your taxes but end up paying far less than you need to. It’s all about minimizing your expenses and coming out on top so your hard earned money stays that way.

Understanding Your Business & Taxes

There is the Small Business Administration (SBA) that is a federal government agency that assists small business owners get connected through business loans, business advice and information on how to run a business. The SBA also offers tax tips for owners as well.

During this tax season and all subsequent ones, you should be sure to heed SBA’s advice on how to minimize tax liabilities and not get into any trouble with the IRS. They offer a lot of helpful tips that can assist in you in doing just that.

Tax Basics

One of the most important aspects of taxes is to keep your own set of records that will assist you in accurately recording profits, losses, expenses, and deductions to be prepared for your accountant and eventually sent into the US government. Your accountant will not be able to give you advice in the midst of an audit if that were to occur.

After creating a good group of documents, it would be wise to file them so that they stay intact for any future digging on either your part or with the IRS. Proper bookkeeping skills are essential in running a business and staying on top of things for tax time. Not to mention it’s quite helpful when you need to overlook expenses during a business plan too.

If you’re trying to increase sales and use tax software make sure that you’re equipped with proper software that can be edited and the data can be backed up for future usage.

Keep your Expenses Separate

One aspect of making sure your taxes are spotless is to keep business and personal expenses at bay and separate from one another. One of the best ways to do this is by creating a separate business banking account to keep away from any personal expenses that occur on a monthly basis.

If you don’t have a business account or credit card for that matter, that should be one of your first orders of business to take care of.  If you’re buying things on a personal credit card for the business, it can be difficult to keep track of that when tax season comes knocking. It won’t end up on your list of itemized deductions and thus will not save you tax money in the long run either.

Some IRS red flags for audits can come up if you’ve been incorrectly claiming certain things as business expenses that actually belong as personal expenses. Try not to mix these things, as the IRS already knows much more than you do on combating any of these issues.

Tax Code Assistance

It’s often a running joke on how difficult it is to understand the tax codes, regulations and all the different IRS rulings. The federal tax rules are somewhere like 70,000+ pages and way too complicated for the majority of people to understand. Small businesses have to deal with more complexities than just a regular person receiving their W2 form. An accountant is necessary when doing your taxes.

A small business accountant can help your business out tremendously. They have to be able to make your tax returns filed on time and accurately as well. They can also be responsible for filing quarterly payroll taxes and keeping on track your yearly expenses with one another. If you have any questions they will be there to answer them.

Accountants know what red flags to watch out for that leads to IRS audits. They will do anything they can to stop that. While it will cost good money to hire an accountant, they are well worth it in their fees as their job is to get you more money at the end of the day anyways. Tax season’s stress is burdened on them and not you, it is their job after all.

Overall, you’ll want to have good software to take care of things and hold all of that data for later, well separating personal and business expenses. Once all of these criteria have been met, simply bring things into the accountant and they’ll do the rest.

Lucas Barton is an accountant who works with a number of smaller businesses on their tax returns. He is an occasional contributor to websites, blogs and forums with his tax tips for small business owners.