It is important to understand tax basics to comply with federal and state tax laws as a business owner. Unfortunately, many businesses owners put off their taxes until the last minute, leading to a lot of confusion and potential fines. It is a good idea to review your income and expenses monthly and meet with a tax advisor to see where you stand at the end of the tax year. Here are some helpful tax planning tips for small businesses.
Keep Accurate Records
Keeping thorough and accurate records during the year will ensure your tax return is correct. With inadequate record-keeping, you could be missing out on deductions or, worse; you could be putting yourself at risk for an audit. It is recommended that every business invests in some type of accounting software because it is user-friendly, cost-effective, and helps you keep track of all your income and expenses.
Track Your Expenses
The IRS permits tax deductions and credits for certain business expenses. You should keep track of all business expenses to take advantage of all the deductions and credits available to you. Some qualified deductions include the cost of business travel and entertainment, gas mileage, car repairs, legal expenses, and home office costs. Additionally, if you have employees, you can deduct their pay as well as additional benefits and awards provided to employees. Keeping a detailed record of deductible expenses will ensure you do not forget them when filing your tax return.
Correctly Classify Your Business
There are many different tax classifications for businesses that you can choose from. Failing to classify your business correctly could result in overpaying taxes. Deciding whether to classify your company as either a C corporation, single-member LLC, sole proprietor, etc., will have a different effect on your taxes. It’s important that you consult with a CPA or bookkeeper to determine how your business should be classified.
Hire a Professional
As a small business owner, it is your responsibility to make sure that your business taxes are filed correctly. One way to ensure your business complies with federal and state tax regulations is to hire a tax professional. Tax professionals provide guidance and assistance on deductions and credit your business may qualify for, and they have experience with the tax laws and codes that could affect your business. Tax professionals, such as accountants and bookkeepers, can help you during the year with your tax planning needs.
No matter the size of your business, doing your own taxes can be stressful. We here at Bowman & Company have years of experience in providing tax planning services to business owners. Reach out to us today to learn more!
Contact Bowman & Company CPA Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.