The goal of tax planning is to owe the government as little as possible and to avoid penalties. Competent tax advice and keeping accurate records are essential to keeping any business afloat. Seeking out a Certified Public Accountant is one of the most sound decisions you could ever make, especially if you’re a first-time small business owner. Here are some tips that we suggest that you keep in mind every time tax season rolls around.
Never Blur the Lines Between Your Personal and Business Expenses
You should always keep your business and personal accounts separate. From the IRS’ perspective, you want your business to look and perform like a business. It increases your tax liability when mixing personal expenses with that of your company’s. Why? The IRS may see your business as more of a hobby, which disallows business expenses to come out of your income. Avoiding this is straightforward. Hold bank accounts and credit cards in your company’s name. Also, prepare regular accounting statements such as your income statement, balance sheet, and cash flow statement to show that you run a legitimate business. If this all seems challenging, reach out to us. Our team can help with tax preparation and all of your other financial needs.
Keep Accurate, Thorough Records
Thorough documentation is essential to justifying what expenses are coming out of an income. Here are some deductions that you should keep a record of:
- Home Office Expenses
- Donations Made to Charities
- Health Insurance
- Any Start-Up Expenses
Tax preparation can be overwhelming if you don’t have it down to a tee. You may be surprised to find that hiring a Certified Public Accountant can save you money. Were you aware that tax preparation fees are tax-deductible? Plus, not only is saving money beneficial but saving yourself time and frustration matters just as much.
Other Tax Preparation Tips
- Digitize your receipts (you can and keep the original, but make sure to organize and file them neatly if you do)
- Put aside a savings account just for taxes alone
- Make your estimated quarterly payments (*** if not, you’ll face penalties)
The sad reality of small businesses is that not all of them make it or become as successful as they’d like to be. The best way to avoid failure is preparation. If you’re a first-time small business owner that needs financial guidance, contact us today.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services are aimed 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.