Tax season is here again. It’s difficult enough doing your taxes, but running the gauntlet of preparing small business taxes can be enough to give you an ulcer without help. There’s no getting around this yearly ritual, but you can make it simpler.
For many small business owners and accountants, the real challenge is knowing what you can and can’t file for. In our list of pointers below, you’ll gain some insight into exactly how to use some of the less well-defined tax deductions to help your business enjoy its largest refund, in addition to some process recommendations you might find helpful.
Use Tax Filing Software
Even if you’ve already discovered how helpful software tools can be, it bears repeating for those who are still doing their taxes with pencil and paper. Software like Turbotax, TaxSlayer and TaxAct simplify the rigors of tax season by giving you the ability to save your work and quickly make adjustments to values entered as the answers to crucial tax policy questions. For more advanced users, many of these solutions give you the option to transition to a form-based layout.
Understand Your State’s Tax Code
The federal tax code is the same for everyone. However, tax laws from state to state differ significantly. A mistake on your state taxes could cost you dearly. Lack of knowledge of a valuable refund that is specific to your state could, too. Consult a tax law office or local CPA who can speak to your business’ state tax requirements.
Save Those Receipts
Here’s one thing both your personal and business tax filings will both benefit from. As a business owner, you’re probably spending much larger quantities and making a higher number of overall transactions. When preparing taxes, business expenses get written off differently than personal ones, and in many cases, you can declare many items you purchase for the office as business expenses. If you work out of your home, for example, you can receive a refund for office space, as long as you have a defensible position.
Register Your Business Correctly
Are you an S-corp, LLC, LLP, a trust or something else? There are major differences in how tax laws view these different business structures. For many companies, an LLC business structure results in the most favorable tax position. However, your business may or may not subscribe to this logic, so do some research and speak to a professional to see if you need to adjust your business structure for a better outcome from tax season.
Don’t Forget About Carryovers
When you have a personal expense that needs to wait out the rest of the year so you can include it on the following year’s taxes, it’s not so difficult to track. However, businesses are constantly creating new expenses and receiving funds, which can leave a lot of money in the gray area. Things can come out of left field in the middle of the year as a result of accounts opened a year ago. Have a special file for your carryovers and make sure to account for all of them.
This fiscal year, we suggest you get started on your taxes early. It can be daunting, yes, but if you do encounter questions, you’ll have enough time to unpack them and get some helpful advice. There are many, many more good tips where these came from, and as technology improves, things are becoming simpler and more streamlined. With a little practice, you’ll no longer fear the taxman!
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