Tax and Accounting Tips for Small Businesses
Entrepreneurship is one of the oldest professions in the world. Developing your own business and running it has many benefits. There is freedom for the business owner over their work schedule. He or she can hire whoever they want as a subordinate or an employee, and fire them from their job if they prove too troublesome. They can experience how it feels to build a company from the ground up and bring it into the fold of success. As many advantages there are for business owners, they also carry some obligations, such as paying taxes. There are plenty of Tax and Accounting Services that are more than happy to assist you in this endeavor.
They must follow the tips given below to make the taxes paying process more organized and streamlined.
1. Keep Personal and Official Expenses Separate
Mixing business and personal expenses makes accounting a tedious task. IRS may also disallow certain business expenses if you appear to be operating as an individual. Tax and Accounting Services agree, the best way to draw the line is to keep separate bank accounts for either purpose.
2. Do Not Miss Deadlines
Missing the deadlines invites scrutiny and penalties. Penalties take huge chunks out of your hard-earned money, whereas, scrutiny invites audits. IRS provides a Tax Calendar for taxpayers. Use it to stay on top of things. Those who employ reputable CPA Tax services rarely find themselves in such conundrum, except because of their own negligence.
3. Use a Proper Software
While Microsoft Excel is a good tool for start-ups, but once the foundation of your business is set, you must invest in better accounting software which can consolidate your business finances, such as; invoicing, payroll and expenses. Almost every Tax and Accounting Service employs advanced accounting tools which can calculate such essentials.
4. Track your Expenses
Tracking expenses reduces your adjusted gross income and your tax liability. Keep tabs on your business expenses, such as; meals, entertainment, travel, transportation, insurance, advertising, legal fees, office supplies and other similar expenses. All Tax and Accounting Services in the market insist on being made aware of all these expenses so their operations run smoother.
5. Digitize Receipts
Make use of expense tracking tools which scan and save the receipts. It reduces the clutter significantly and makes the organization easier. It saves time and expenses in case you are ever audited by IRS. Every modern CPA Accounting Service insists on digitized data rather than manual one.
6. Apply Deduction for your Home Office
If you work from home, do not forget to apply for tax deduction that you are entitled to receive based on the size of your office. The ongoing rate is $5 per square foot. Which means if your home office is 100 sq. feet in area, you are entitled to receive $500 deduction. All CPA Accounting and Tax Services Firms ask you for clarification in this regard, and even if they do not, you must insist upon it.
7. Examine Last Year’s Return
The tax returns from a previous year must never be discarded. You must save them and analyze them. It will provide insight into the differences and changes. By analyzing them you can make a framework of what the next year’s returns will look like. Moreover, it is always a good idea to keep those records handy in case of surprise audit. Every Tax and Accounting Services Firm worth its salt, will insist upon it.
8. Hire a Certified Accountant
An experienced and reliable accountant can save a business owner from many headaches. A professional accountant, especially if it is an outsourced one, can be paid solely for the services he or she provides. They do not have to be hired full time. They can easily prepare your taxes and financial reports while tremendously increasing the efficiency of your business.
9. Claim the Income that is reported to IRS
IRS gets a copy of your Form 1099-MISC that you receive. They analyze the income reported in this Form and match it against it what their own records indicate that you have received. You must ensure that there is no discrepancy in the two records, or risk penalties.
10. Understand the Difference Between Net and Gross Income
Small business owners often forget to take Net income into consideration and focus only on the Gross. The difference between them can determine whether your business is actually profitable or a waste of time and resources. If the net costs for manufacturing, taxing and selling a product gives marginal or negative profit, it is better to raise the price, or look for a new avenue of business.
11. Classification of a Business
Classifying your business prevents you from over paying the taxes. The classification types determine what effect they have on taxes. Following are some of the classifications;
I) C Corporation
II) S Corporation
III) Limited Liability Partnership
IV) Limited Liability Company
V) Single Member LLC
VI) Sole Proprietor
12. Constant Vigilance
Most taxpayers breath a sigh of relief once April passes and tend to remove themselves from any discussions relevant to taxes. The year passes eventually and they are back where they were before. you must understand that tax planning is an integral part of making important decisions and establishing a financially viable company. By keeping vigilant throughout the year, paying attention to maintain accounts, clean reports and well-maintained records goes a long way into establishing your company’s
SG Inc. CPA is a Tax and Accounting Services Firm in Dallas, Texas. All of the above-mentioned points are followed by us, and we always advise our clients, more specifically the new and small business owners to follow them religiously. Contact for cheap and meticulous services.