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7 Small Business Tax Tips
  • 28 March 2017
  • Eric Michaels

7 Small Business Tax Tips

Launching a small business can involve a lot of new learning experiences, especially when it comes to the more complicated matters, such as filing your taxes. As a general rule, you should constantly strive to consider new ways to improve your accounting practices. By doing so, you can streamline your filing process when the deadline approaches. Here are seven small business tax tips that can help you stay compliant and earn the best possible tax return.

1. Collect your receipts on a monthly basis

Every sound tax filing begins with good bookkeeping practices. While you can wait until the year ends to collect your receipts, you can truly benefit by making an effort to organize these records on a monthly basis. This approach will help you match your payments and other data to your financial accounts. If you wait to do everything at the same time, you may be more likely to make mistakes.

2. Track your mileage

Company cars can provide you with opportunities for tax write-offs, but you need to be careful about blending the lines between work and personal trips. If you use your own car for work, make sure to keep a notebook in the car so that you can document every time you take a business trip. By making an effort to be clear about these distinctions from the onset, you can help to make a future audit a more pleasant experience.

3. Isolate your business expenses

Documenting business travel is not the only challenging aspect of small business bookkeeping. If you have a work phone or a home office, the associated expenses can easily get mixed together over the course of a busy week. As such, it may be worthwhile for you to invest in a business credit card, as this separate line of payment will help you to distinguish between your business and personal expenses.

4. Break your payments down into quarters

When you file your taxes as a sole proprietor or a LLC, the IRS will expect you to submit estimated tax payments on a quarterly basis. If your payments are late, you may be charged with a penalty. You can avoid this added expense by ensuring that you complete all of the necessary payments on time. For more information, you can refer to the useful estimated tax sheets that the IRS provides on their website.

5. Master the art of deductions

By being aware of the types of deductions that apply to you (and exactly how much you can deduct), you can put yourself in the position to save large funds of money on a yearly basis. You may want to refer to an accountant for guidance on the specific types of deductions that you can take as a new start-up company. In addition, you should make sure that you are aware of all of your daily costs that can be considered deductible expenses. For example, some of your travel and equipment costs may be fair game.

6. Know when to buy equipment

Section 179 of the tax code allows business owners to deduct the cost of business vehicles, computers, software, and other types of equipment. Timing is important here: If money is tight, you may want to consider saving your purchases for the end of the year so that you can immediately claim the deductions when you file the following year. Rules for 179 deductions can change on a regular basis, so make sure to check with your accountant before you make your move.

7. Start your employees off right

When the time comes to hire new employees, you should do all you can to ensure that you are in full compliance before their first day on the job. Overall, you should make sure that you have completed all of the necessary forms for each type of employee who helps your business operate. For example, according to the IRS, "employers who withhold federal income tax or social security and Medicare taxes must file Form 941, Employer's Quarterly Federal Tax Return each quarter."

By following the above tax tips, you can reduce your tax-related stress, and save time and energy when it comes to file. For additional guidance, you should reach out to your accountant or a financial professional.

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