Many small business owners make careless mistakes when filing their taxes – are you one of them? Instead of throwing your profit to penalties and skipping out on savings, adopt these strategies to save money better spent on helping your business thrive.
First order of business: never overlook small expenses. One-time workshops, a business lunch here and there, plus office supplies probably don’t mean much to your bank account, but they can add up to a much larger deduction. Despite feeling like small potatoes, these expenses are valuable tools that keep your business functioning on a daily basis. Account for each and every cost on a spreadsheet or any recording tool you choose, and it will pay off come tax season.
With that said, don’t exaggerate or overdo expenses. Err on the side of caution when adding numbers to your deductibles spreadsheet. This includes adding expenses that simply don’t apply, like some travel expenses and home office expenses, but also rounding up the cost of qualifying expenses. These habits can wave a red flag to the IRS – we promise, it’s not worth it.
Organizing might be daunting, but as a business owner, you have a lot to account for. While you have to file federal taxes, you also must keep track of property, local taxes, payroll, and self-employment taxes – it can pile up and get overwhelming quickly. Keep a calendar and flag due dates well in advance in order to avoid penalties and rushed mistakes. Another big tip for organization: separate personal and business accounts to simplify and streamline identifying income and expenses. The last thing you want to do is be 2 weeks away from a due date with months and months of bank statements to parse through.
Updated your business’s records is another money-saver. Updating records equals opportunities to reduce your taxable income. You should not only track expenses, but keep documentation in the form of receipts to support your claims, as required by the IRS. As you see your business growing, you may want to invest in an accounting software. Utilize a program to take a weekly peek at your account, including cash flow, all transactions, receivable, and payable.
Many small businesses call upon accounting programs for organizing, updating, and staying on top of finances, but it might not be enough. An accountant or tax specialist will be helpful every step of the way – someone who has IRS training and is licensed to advise your tax preparation and filing will be worth every penny. Just like with your business, know when to make smart investments.
Call it penny pinching or being business savvy; either way, these strategies will help you avoid unnecessary expenses and increase your tax return, benefiting your business’s cashflow in the best ways.
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