Tax season can be intimidating to small business owners. However, if you take the proper steps beforehand and know what to expect, filing your company’s information can be a quick and painless process. Here are some tips to help you manage your taxes as a small business.
Use an Accounting Software
Trying to compile your business’s expenses with a spreadsheet or other outdated methods can lead to complications. Consider using professional accounting software throughout the year to help you compile your business’s expenses, deductions, income, and other important metrics. This will provide you with accurate numbers on your tax files, which promote fewer inconsistencies and lower your chances of receiving an audit.
You should also consider using high-quality payroll software to manage your employees’ work hours, payment, and tax information. A high-quality software makes distributing W-2 tax forms much easier and more efficient.
Know What You Can Deduct
During the last few years, as working from home has become more common, many small business owners began operating out of a home office. Home office expenses are perfect examples of deductions you can report on your taxes. Save your receipts for office furniture, appliances, electronics, and more. Even a certain portion of your rent or mortgage can count toward home office deductions if your office space is strictly dedicated to work.
Other general business deductions include the more obvious ones, such as inventory, payroll, marketing, insurance, shipping and delivery, packaging, and more. The list is long, which is why it’s so important to save your receipts and practice accounting throughout the year.
Separate Business and Personal Expenses
Separating your personal and business expenses as a small business owner can be difficult, especially if you work from home. Nevertheless, it’s important to physically separate your personal and commercial expenses by creating unique banking accounts. Separating your personal and business finances makes accounting throughout the year and tax season easier to deal with.
Store Documents Responsibly
Small businesses can still be targets of information theft, especially around tax season. During this time of year, business owners handle confidential documents more than ever, and these papers inevitably end up in the trash. However, you should never carelessly dispose of information such as tax forms. Remember to store and dispose of old tax documents properly to minimize the chances of your private information falling into the wrong hands.
Don’t let tax season catch you off guard this year. Use these tips to help you manage your taxes as a small business owner. Start the filing process early to give yourself plenty of time to file and promote a quick return.