5 Tax Tips for Small Business Owners

Income tax season is in full swing. The deadline for filing and paying is looming, and the first quarter estimated payments due date nearing. It’s clearly safe to say everyone’s thinking about taxes. Here are five tips to help small business owners make informed decisions. 

Keep Good Records

It sounds redundant, but it’s true. The best way to be prepared for tax season and a future audit is to have a great recordkeeping process. Because businesses can write off expenses and get specific deductions on the state, federal, and local level, you can easily find yourself hundreds of entries for just a few months. 

While it’s great that you’re keeping track of everything, if you’re not entering the information electronically at least once per month, you could have dozens of transactions to enter into your tax or accounting software at the end of the year. An income tax calculator can help simplify the process, and there are plenty of free ones available online. When you’re saving records, don’t forget to add health care costs for yourself and any employees. Also, small businesses that pay a family member to complete tasks can be eligible for additional deductions, so make sure to save those receipts. 

Double-Check for New Deductions

Tax laws are forever changing. What’s here today is gone tomorrow. Paying attention to dozens of changes every year can monopolize your time. Additionally, people that aren’t good with the legal writing and terms that many new laws come out in, it can be confusing and leave you open to making costly mistakes. If you find yourself spending too much time trying to make sense of legal changes, consider hiring a professional to prepare your small business taxes. 

Make Estimated Tax Payments 

Don’t skip the estimated taxes to the state, local, and federal taxing jurisdictions. While most agencies give businesses a pass on the first year for underestimation of their tax obligations, in subsequent years, if you fail to make payments in the quarter than they’re due, you can face hefty penalties and interest charges. 

There are four payments each year with the first on April 15th. The second payment is June 15th, the third is September 15th, and the last is January 15th. You can make these online through the website of the taxing jurisdiction and claim them as prepayments when you file on April 15th. Similar to employee withholdings, any overpayments you make are refunded to you. At this time, you can make the election to send the overpayment to your first quarterly payment for the next tax year. 

Learn to Use Tax and Accounting Software 

All taxes are done electronically now. New York State requires electronic filing, and the easiest way to track expenses, earnings, and other records are through tax software. Unfortunately, it’s not as easy as picking one program. There are several options, some of which are very complicated and others that are designed for smaller businesses and people that don’t have days and weeks to dedicate to software training. You can try out Tax software such as Drake Hosted on a Cloud Citrix Virtual Desktop for your tax and bookkeeping needs.

However, no matter which one you pick, there’s still a learning curve and the data entry portion. Although most documents are electronic, for tax purposes, you’re still receiving tons of papers in the mail that you can’t upload easily into the program. 

Hire an Accountant 

Yes—small business taxes aren’t easy and can be a part-time job alone. You have to keep immaculate records, learn how to use different software programs, watch for changes in tax law, and pay attention to multiple due dates for filing and payments. Skip the headache and new skills that aren’t necessarily important for your business, and hire a Long Island tax lawyer. As a certified and licensed professional, they know the law and prepare for changes, so you don’t have to worry. 

If you’re still unconvinced, do the math. How long does it take you to learn the software, look for updates, and file all the state, federal, and local tax forms? Unless you’re undercutting your value, the ten-plus hours you put into doing the work yourself costs you more than it would to hire a professional and ensure it’s done right. Mistakes with taxes at any level can cost a business thousands of dollars to fix. 

Don’t get discouraged at tax time. If you prepare from the beginning of the year, you’ll be ready by April 15th to file your returns and make any payments necessary. For questions or problems, such as IRS and state tax audits, contact a tax attorney to get ahead of audits and other taxation authority queries.