Having a small business can be a lot more work than many people realize. When it comes to taxes, sometimes the work load can become overwhelming. To help, here are a few tips that can ease the pain of dealing with a small business tax return.
1. Get an Accountant
Image via Flickr by Alan Cleaver
Before you start your business, consider consulting an accountant. Accountants can tell you which type of business entity you want to file as. Your accountant will learn about your business and figure out how to set you up so you end up paying the least amount of taxes at the end of the year. Even with an accountant, you’ll still have to spend time working on your taxes every week, but not nearly as much as doing it yourself. Correctly organizing all the finances of a small business becomes an everyday job, and one small mistake on your end could end up costing you so much time and money in the long run, meaning you would have saved more by hiring an accountant.
2. Do Paperwork Once a Week
Try to set aside at least three hours every week for calculating taxes. If you have an accountant and you set aside a 3 hour period every week just to get the papers done, you’ll have hardly any work to do come tax season. Don’t put it off. Make sure it gets done so you don’t overwhelm yourself in the future, especially when you don’t know what other problems could arise.
3. Turn in Receipts Quarterly
Remember to turn in your receipts every quarter. You must do this to get tax breaks on your expenses. The more receipts you turn in, the more deductions you are eligible to receive. You should also learn what can and can’t be deducted.
Before you turn in your receipts, though, you must have proof of reimbursement. This essentially means you must prove that you were able to pay yourself back, with business income, for each business expense. Make a point to reimburse yourself at least once a month so you can stay up to date once the end of the quarter comes around. Most people use a program like Quickbooks to keep track of expenses and reimbursement.
4. Hire Help
Other problems may come up that your accountant doesn’t have expertise on. Any time a part of the process feels as if it’s going over your head, consider hiring an expert. A professional with a tax degree can save you time and money by making sure you don’t make any mistakes.
5. Have a Daily Filing System
In addition to having a filing cabinet, or some other organized storage for all your papers, you want to have a daily system laid out in front of you for easy access to any needed accounting information. For example, your receipts from the last three months should all be within reach while dealing with the business, in case any dispute or question about a transaction arises.
Follow these tips and you shouldn’t have much to worry about once tax season comes around.