3 Tax Tips Every Small Business Owner Needs to Know
Filing taxes as a small business owner can be challenging, whether it’s your first time or your tenth. This is because as companies expand, doing taxes becomes more complicated. However, the average small business pays nearly 20% in taxes at the end of each year, which can add up to an overwhelming bill if you don’t plan ahead.
Fortunately, we can help with that. Let’s talk about some small business tax tips to help you save the most this year!
Develop a Tracking System
You will need a strong tracking system for both revenue and expenses. If you’re paid primarily through one account, then tracking revenue shouldn’t be too difficult. However, if you receive cash, checks, PayPal, and credit payments, you’ll need to develop a strong tracking system.
Tracking expenses can save you a lot of money, and every penny counts as a small business owner. Small business taxes can add up quickly, but you only have to pay based on your profits, which are revenue minus expenses. Make sure you are diligently tracking these expenses throughout the year so you don’t miss anything and overpay when you file taxes.
You can use an app, save receipts, or simply use one account to keep it in one place. If you use the same credit card for business (and only business), then you can view all of your business expenses on your statement. However, it’s important to have a system for all other purchases you make.
Know Which Forms You Need
You’ll need to have all of your tax forms in order before you file, so make sure you know which forms you’ll need before filing. There could be forms for charitable contributions, health insurance, and more on top of your normal 1040.
On top of that, you may have 1099s if you worked with other businesses regularly throughout the year as a contractor. There are plenty of different forms that businesses may need to file for the first time, so it’s best to find these ahead of time.
For example, if you had employees file for unemployment insurance, then you may have to file a 940 or 941. But, what is a 940, and what is a 941? Talk to your tax accountant if you’re unsure about which forms you’ll need.
Consider Paying More Often
If you find yourself overwhelmed while doing taxes every year, consider paying them quarterly. This way, you won’t have to worry about saving up one huge sum for the next year.
Otherwise, consider paying yourself a salary and having your taxes taken out throughout the year. This way, you’ll file a W2 for your personal income and company taxes for the remaining profits. It’s entirely up to you as the business owner!
Put These Tax Tips to Use
Now that you have some helpful small business tax tips, why not put them to use? The only way to ensure that you don’t make any costly mistakes like overpaying or underreporting is to do your diligence throughout the year and prepare for tax time.
Get help from a professional if you need it and stay up to date with our latest tips for your business. And don’t forget to check out our blog to get more career-related tips.
