Personal taxes can be complicated. Business taxes can be even more difficult. If you own a small business, tax time can be challenging. The livelihood of any company is at least partially dependent on its ability to minimize its tax liability, while meeting the requirements of the IRS. While taxes are rarely enjoyable or interesting topic, they’re a part of any business owner’s life. Getting a handle your business taxes can increase your income and help you avoid legal issues.
Check out these tax tips that are helpful for any small business:
1.Keep your tax and financial documents for at least 7 years. If you’re ever
audited, you’ll need those records. Any claims made at tax time require
supporting documentation. Keeping good records is an excellent idea for any
small business because it encourages organization. It is very difficult to
reconstruct records at a later date.
2.Know your deadlines. It isn’t all about April 15th. While most business entities
can wait until “tax day,” C-corporations are required to file within 10 weeks
after the fiscal year ends, which is normally December 31st.
3.Understand your loans. The IRS doesn’t classify most business loans as income.
But the interest paid on loans is generally a deductible expense. It’s important to
have records regarding the use of any loans. It might be for equipment or to
finance some other activity.
4.Know the different types of audits. There are several types of audits and some
are more intimidating than others.
Office audit: Generally this is a simple audit. You’ll be requested to report
to your local IRS office to resolve some discrepancy.
Correspondence audit: You’ll just be asked to send in a document via mail
Field audit: These tend to be very thorough audits and they are conducted
at your place of business.
Criminal investigation audit: Consult your lawyer. You’re suspected of tax
5.Pay your quarterly tax bill. This is a common mistake. If you have an employer,
your taxes are regularly taken out of your paycheck. If you’re self-employed,
you’re required to estimate your tax each quarter and pay it. Failure to pay this
can result in a significant tax penalty.
You might also end up with a bigger tax bill than you can handle in a single
payment. Make a habit of setting aside a portion of your profit each month in
anticipation of paying your quarterly taxes.
6.Prepare early. The vast number of tax filers wait until the last minute. If you’re
expecting a refund, this can be the worst time to file. The IRS is overwhelmed
with all the tax returns that pour in. However, this can also be the best time to
avoid an audit. Preparing your tax return early leaves you time to find any
missing documents and answer any questions.
7.Get help. Depending on the complexity of your business’s finances, hiring an
expert to prepare your tax return might be a good idea. In theory, the money
you spend ought to result in a smaller tax burden. It’s also helpful if any legal
8.Avoid using taxes collected from employee payroll to pay business expenses.
This common practice upsets the IRS greatly. When you withhold taxes, send
them to the IRS!
Taxes are a large expense for any business that shows a profit. It only makes sense to
minimize that expense. Consult a tax professional if you have any questions or
concerns regarding your business’s tax situation.