9 Tax Tips for Small Business Owners

Before you sit down and get to work on your taxes, check out our list of tax tips

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Tax season is in full swing — review our checklist to make filing taxes easier

Tax season is here with small and medium-sized businesses gathering receipts, checking data, and preparing to file. Tax time is typically challenging for every business — no matter their size —  but for SMBs, who often manage their taxes independently, getting it right is imperative.

Putting together your annual tax return involves reconciling a host of data: payroll, sales tax, accounts payable and receivable, as well as bookkeeping records. You’ll essentially be creating a financial snapshot of your business.

The resulting financial statements from all these aspects of your organization create the basis for your return. Before you sit down with a calculator, here are some tips to get the job done easier.

Make sure data is current

Before you start filling out tax forms, make sure the data from each aspect of your financial records is accurate and up-to-date. All your bookkeeping records should be finalized throughout the end of the previous year. Any outstanding deposits, payments, or taxes should be submitted so your return is an accurate reflection of the previous year.

Gather receipts and records

Hopefully you have detailed information on invoices, payments and payouts, payroll, and expenses. Gathering the receipts, spreadsheets, and other information together before you begin can make it easier to complete your forms.

For example, some credit card issuers offer annual summaries of your account activity. These, and even monthly card statements, can help you organize expenses paid out. Rather than chasing down receipts as you’re trying to do the math, have everything necessary at your fingertips.

Putting together your annual tax return involves reconciling a host of data: payroll, sales tax, accounts payable and receivable, as well as bookkeeping records. You’ll essentially be creating a financial snapshot of your business.

Restructure your organization, if applicable

The Tax Cuts and Jobs Act (TCJA) reformed taxes for owners of some pass-through businesses. For these small organizations, owners file their taxes through their individual income tax forms.

Those who qualify receive a qualified business income (QBI) deduction (section 199A deduction). This includes some sole proprietorships, partnerships, and S corporations. Some trusts and estates may also be able to take the deduction.

The deduction allows non-corporate taxpayers to deduct up to 20% off their taxable income. If you haven’t structured your business already, filing as one of these may be favorable, if they apply to your organization.

Find the right return for your business 

Make sure you’re using the right forms to file your taxes. They vary depending on the structure of your company (see above). For instance, sole proprietorships will want to fill out a different form than corporations.

The IRS provides guidance on what form(s) are appropriate for your company on their website. Using the right form for your business can point you to the necessary supplemental forms (like Schedule Cs for deductions) to accurately complete your return.

Run a quick calendar check

Take a look through your calendar for the past year. Were there expenses or outlays you may have forgotten? You might find expenses like an unexpected trip to meet with a client, last-minute holiday gifts for staffers, or a charity event you sponsored or participated in.

Any of these, or other forgotten events, could be additional deductible expenses.

Plan for retirement, snag a tax break

Open or contribute to a retirement savings plan before you file. Taxpayers have until April 15, 2020 to put money into a retirement account to enjoy tax benefits for the previous year.

In addition to a tax-deferral on the amount you’ve put into your account, retirement payments are tax deductible. There are limits to the amount you can save, but the benefits of retirement planning are good for business in the short and long term.

Schedule time to work on your return

Clear your calendar and set aside time to work, uninterrupted, on your taxes. They’re simply too important to compile with distractions. If your staff members simply cannot leave you alone for a few hours, consider working on your taxes after hours or on the weekend. You’ll want to give your return undivided attention.

Do you need the help of a professional? 

Has your business grown, or have there been significant changes in the past year that require you to get the help of a tax professional to compile your return? The cost of an accountant or CPA varies by location and the complexity of your return, but if you’re overwhelmed it might be worth the investment.

Make sure to find a professional who is a CPA or a certified tax professional. If looking for help, ask about the fee structure before you set the appointment.

Some charge a flat rate, some by the hour; others add fees for phone calls or other filing assistance. Even though a tax preparer is helping with your return, you’ll still need to have your files and data in order and easy to understand — particularly if they’re charging an hourly rate.

Plan for next year 

As you prepare to file and pay taxes for this year, look at the challenges you’ve faced getting your return completed. Can you plan better for next year so filing is easier? What data was difficult to wrangle and what was easy to compile?

An outdated or manual payroll system, for example, could add hours of unnecessary work. If you’re still using spreadsheets to manage the books, consider accounting software to help organize and streamline your bookkeeping. Whatever hurdles you face this tax season, it’s a great time to improve on them for the next.

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