Tax Cutoff is Approaching, Is Your Business Ready?
Getting a small business off the ground can put enough on your plate without having to think ahead to tax season. But if you’re new to owning your own business, you might not be prepared for how complicated small businesses taxes can be and how much you need to take them into consideration all year long. Keeping accurate books and records will not only help you in the event of an audit, it will also make sure you get the most deductions possible. Tax deductions can be a huge financial boost to a new business, or at least a good way to avoid owing too much, and you might be entitled to write off more than you know. Maximizing your deductions plus avoiding traps associated with filing business taxes can often make for a delicate balance.
1. Get Help – You Need It!
No matter how savvy you think you are with the tax system, you shouldn’t prepare your business taxes alone. Doing taxes for your business is actually very complicated and can often involve a lot of paperwork and a lot of math, and if you make serious mistakes, they can cost you in later audits. Government rates and percentages for how much you can deduct are constantly changing, and there are probably rules about what you can deduct and how you report it that you simply don’t understand. In fact, the sooner you get help with tax preparations, the easier the process of filing your taxes will be. Finding a good accountant should be one of your priorities once your business starts to take shape. You may need a reliable bookkeeper too, if your company’s financial dealings and clientele become too extensive for you to keep track of your records.
2. Special Deductions and Potential Problems in Year One
Your first year as a business owner can be slightly different than your subsequent years when it comes to how you file taxes. The biggest pitfall for new businesses are the estimated tax payments that you submit quarterly. Your estimated payments are based on how much you expect to earn during the year, but if your business is brand new, it can be really difficult to make an educated guess. If you pay far too little, you could end up owing a lot of money at the end of the year. But you can also write off many of the costs involved in forming your business – the Small Business Job act of 2010 permanently raised the amount of startup costs that first-time business owners can deduct to $10,000. That’s a good reason to keep your receipts.
3. Knowing What You Can and Can’t Write Off
With all of the clients, meetings, and business excursions that can happen in a year, it’s easy to get mixed up with what you can and can’t deduct, and you might not even intend to. Remember to keep business receipts for strictly business activities. You can write off meals and entertainment events as long as they are directly related to client meetings or other business purposes. Even the amount of automobile deductions you make is directly related to how much you use your car for business. All personal driving is invalid. The good news is that there are plenty of things you can write off that business owners sometimes forget. You’re entitled to the home office deduction as long as you have a true home office, even if you don’t do all your work there. If you’re self-employed and paying for private health insurance, you can also deduct 100 percent of the cost.
As you can see, there are a lot of things to consider when it comes to filing business taxes. You need a reliable accountant or tax preparation service to make sure you understand what your records really mean as far as what you owe and what you can be refunded. Getting a head start on thinking about these issues can change the future of your business for many tax seasons to come.
Charles Hoyt blogs about financing at for mckinleyplowman.com.au. If you’re getting your business ready for tax season, look into more information at http://www.mckinleyplowman.com.au/content/migration/uk_pension_transfers/67.