Dealing with taxes is one of the biggest fears people have when they consider starting a small business. Chances are pretty good that you will end up simply hiring a tax professional, but that does not mean that you can be neglectful throughout the year.
Organization is Imperative
The more organized you are, the easier it will be for you or a tax professional to figure out your taxes, and get you the best return possible. If you allow your business to become a cluster and keep thinking you will deal with everything next April, you will find yourself miserable. Not to mention, if you do not have time to be organized now, you certainly will not have time to organize your mess when it is tax time. If you need help, just hire a virtual assistant for an hour a day or a few hours per week to keep everything inline.
Organize Your Receipts
Can you use credit card receipts come tax time? In theory; yes, but will you feel like going through all your statements? Probably not! The single most important thing you can do is save your receipts and keep them organized. Depending on your business you may want to keep receipts separate in specific boxes for bills, supplies, other expenses, etc. If you take the time to write any relevant details on the receipt, this will be helpful should you ever be audited.
Jump on Business Travel Opportunities
Whether you go to a conference on the other side of the county or you attend a seminar in your home state, these are opportunities that should not be missed. Not only will they help you be as successful as possible with your business, these expenses are 100 percent tax deductible. This includes the gas or airfare to get there, accommodations, meals, etc.
Make Business Related Purchases
If you have your eye on a new computer, scanner, copier, etc., you should buy it. If you need a new desk, ergonomic work chair, or anything else for your office space, you should get this too. All business-related furniture, electronics, software, and supplies are 100 percent tax deductible.
Do Not Go Overboard
Although you can deduct an awful lot when you have a home business, you cannot show a loss year after year. That being said, if you are showing a profit, and making your tax payments, then claim everything you can. Many people do not realize they can even claim a portion of their utilities, internet service, and rent or mortgage payment. That being said, to show a loss one year is one thing, but three years in a row will raise a giant red flag.
Keep Separate Accounts
It is surprising that many people assume they can just use one account for personal or business use. This will be a nightmare should the IRS ever come knocking at your door. Make business-related purchases through your business checking account. This falls under staying organized, but it is important enough to deserve an honorable mention.
Pay Quarterly Taxes
It is a lot easier to pay the estimated tax quarterly and be surprised with a bit of a return than it is to come up with a large chunk of change April 15th when you find out you owe more than you anticipated. If you are not going to make quarterly payments, at least set a little money aside every month for this purpose.
Hire a Professional
The expense of a tax accountant will be the best money you ever spend. Oh, and it is 100 percent tax deductible too, so you have no excuse. If you were working an average day job, you could use one of the many free online filing tools to do your taxes. When you run a home-based business, there are too many deductibles that can increase your risk for an audit. Just hire someone you can trust to deal with every year. They will become one of the most people in your life.