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Preparing Your Small Business for Tax Season: Tips and Tricks

No matter what time of the year it is, small business owners should always be preparing for the dreaded tax season. 

Tax season can be stressful for small business owners, but with some tips and tricks, you can make the process less daunting. 

In this blog post, we will discuss the different ways in which you can prepare your small business for tax season.

Keep All Your Records Organized

The key to filing taxes successfully is having all the right documentation. It’s important to keep all the receipts, invoices, and financial statements organized in a systematic way. This will not only help ease the process of filing your taxes but will also help during an IRS audit. Utilize a software program or app to help you digitally store your business records, which can help streamline the process.

Know Your Business Deductions

Take the time to understand the business deductions which you are eligible for to reduce your tax liability. Review your deductions from last year’s return and identify any significant changes that can impact your tax liability. Some common expenses that are deductible include office rent, mortgage interest payments, business insurance, and depreciation. Knowing which deductions you can claim will reduce your tax bill significantly.

Consult with a Professional

Small business tax laws are complicated, and they are constantly changing. It’s a good idea to consult with a professional to make sure that you are in compliance with all tax code. Ideally, choose a certified public accountant (CPA) who has experience working with small businesses. They can not only help with tax preparation but also provide valuable advice regarding future tax planning.

Estimate Your Quarterly Taxes

If your business is expected to owe more than $1,000 in taxes for the current tax year, you will be required to pay quarterly tax estimates. This tax amount is based on your predicted income for the year, so it’s essential to review your prior year’s income and expenses, so you can have an idea of what you can expect to earn this year. Failure to pay quarterly taxes can result in penalties and interest charges by the IRS.

Last-Minute Shuffling of Funds

Contribute the specified amount to your company’s Simple IRA, SEP IRA, Individual 401(k), or other retirement account plan before the tax filing deadline. It may require an adjustment to the financial strategy. Before the year-end, discuss the retirement strategy with a tax lawyer, CPA, or financial planner to find the best way to save for the future and make the most of valuable tax breaks.

Tax season may not be the most enjoyable time of year for small business owners, but by preparing in advance, keeping organized records, knowing your deductions, consulting with a pro, estimating quarterly taxes, and last-minute shuffling of funds, you can make the process a little easier.

By doing so, you can save your valuable time and money, and ultimately make better business decisions that will profitability benefit your business’ future.

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