For new business owners, everything from company management to filing taxes can be a daunting experience. Taxes are certainly a big deal when it comes to running your business correctly, so it’s important to know the best practices for doing them right.
These 5 tips below can help you hit the mark with how you file your business’s taxes:
1. Work with a professional
Filing your taxes correctly is definitely one of the most important things for your business, and in some circumstances it could be best to work with a professional so they can use tax practice management software to expertly prepare your taxes. This way you can avoid any issues and make sure everything is filed using the best practices, so you get the most out of your deductions and avoid overpaying taxes.
2. Make sure you report your expenses
A way to get deductions on the amount of taxes you may owe the government is to report expenses related to your business and things used at the office. For example, you may be able to include everything from meals to car use for the job, as well as office supplies and equipment.
This is where logging your daily expenses as they happen can go far in benefiting you when it’s tax time. There are various apps or books available for you to use to help you keep a detailed record, and if you want to make sure you don’t miss a thing, consider a receipt scanner that will make sure no receipt gets lost.
3. Keep extensive records
Along the same lines, you’ll want to make sure that you keep accurate and in-depth records and documentation. When it comes to getting deductions and reporting income to the IRS, it’s imperative that you have proof for everything you’re claiming.
While you may be able to handle your income and report it along with running a company, there’s still room for mistakes. If you want to be sure that everything is 100% accurate and organized, consider hiring a professional accountant to help you with bookkeeping so you can be sure everything is up-to-standard and up-to-date. If you decide to do your own bookkeeping and maintain your own records, take some time to study the documentation the IRS will require of you so you don’t miss a thing when filing.
4. Don’t forget to label your type of company correctly
Are you self-employed but stating that you run a small business? Perhaps you’re classifying your company as a Single Member LLC when you should be classifying your tax forms with a Sole Proprietor.
When you’re in doubt about how you should label your small business when filing for taxes, this may be a good time to work with a business accountant to make sure you’re getting the most from your tax preparation. In some cases, you could be overpaying on your taxes if you haven’t been classifying your business correctly.
5. Don’t combine personal with business income
Not only can it cause problems in the future should the IRS audit you, but combining your personal and business income together simply isn’t the best practice. It can become confusing when recording expenses and reporting income.
While you may run a small business with only a couple of employees and it can feel easy to simply go ahead and use business money for your family’s needs, it’s best to keep things separate. Instead, open a business credit card to use for your company only and pay yourself a salary that can be spent on your personal needs.
Whether you decide to work with a professional or not, it’s important to educate yourself on everything you need to know about filing taxes. Many people end up overpaying on taxes simply because they don’t know all the ways they can get deductions and avoid penalties. If you haven’t started yet, consider organizing your records and streamlining how you handle your taxes today.