Small Business Tax Preparation: Tax Tips for New Business Owners
As a business owner, tax preparation is likely one of the last items on your list of things to do. With looming deadlines and complex government regulations, it can be easy to become overwhelmed by all the details involved with filing corporate taxes. However, taking careful steps along the way and staying organized throughout the year are key components in preparing for tax season more efficiently. With that in mind, here are some small business tax preparation tips for new business owners - so you can ensure your company’s taxes are filed correctly and on time!
Commit to clean bookkeeping from day one
Committing to clean bookkeeping is an essential tax preparation tip for small businesses. Staying organized throughout the year will save you valuable time and money when it comes to preparing your taxes. Keeping accurate transaction records, reviewing bank statements regularly, and organizing acquired documents throughout the year are proactive steps that every business should be taking in order to ensure a successful tax preparation experience.
Regularly setting aside time to review business operations and finances can add tremendous value in creating financial clarity, forecasting future profits and losses, as well as completing your taxes efficiently.
In addition, with the wide range of accounting software out there, there’s no reason to rely on time-consuming manual methods that leave room for error.
All-in-one options like Xero automate your most important bookkeeping processes, including:
Tracking expenses;
Tracking sales and income;
Creating and sending invoices and
Managing inventory.
With your financial records all in one place and up-to-date, you’re better positioned to maximize your refund, while avoiding penalties associated with incorrect or incomplete tax returns.
Capture every business expense
As a small business, it’s important to ensure that you are capturing all of your business expenses when preparing for taxes. Investing in an accounting system can help by tracking income and expenses more efficiently. It's also useful to organize your receipts, invoices and financial reports into one digital location so they are easily accessible when tax time comes around.
Without carefully logged receipts, entrepreneurs must forfeit valuable tax deductions, sacrificing cash they could be funneling back into their business.
Cash in on claimable expenses by using a mobile app to record receipt data, track mileage and generate expense reports. As an added bonus, many of these tools sync with your all-in-one accounting software.
Separate business from personal expenses
Separating business and personal expenses allows you to easily identify which purchases are deductible on income tax returns. Make sure you have an account dedicated solely to track your business expenses and set up a system for reporting them. If in doubt, be sure to consult with a financial adviser or accountant before claiming any expenses as deductions.
Recommended steps to separate your business and personal finances include:
Create a separate bank account for your business, and designate a credit card solely for business purposes (this will help you track expenditures while building up your credit and borrowing power);
Never combine business and personal expenses (for example, if you buy printer ink for your home and your business at the same time, ask for two separate receipts);
Pay yourself a set salary from your business checking account each month (this will help you determine how your income, as well as the business, will be taxed).
Always consult with an accountant
Not sure exactly what you can claim as a business expense? Wondering which accounting software to use or how to interpret local tax regulations?
Taking the time to properly consult with an accountant is an important tip for small businesses to keep in mind when it comes to tax preparation. Not only will an accountant be able to calculate due taxes more efficiently, but they will also be able to provide sound advice about navigating taxation laws and advice about saving money through deductions and credits.
Consulting with a qualified accountant can provide peace of mind, as any potential problems can be identified and addressed early on - which can prevent costly penalties from arising later on.
In addition to managing the nuts and bolts of tax preparation, regular meetings with an accountant will help you continuously improve bookkeeping practices and better understand the financial workings of your small business.
Those organizational strategies you commit to now will promote positive relations with your local tax authorities – and the long-term financial health of your company.
Need an accountant to help you with your small business tax preparation? MATAX is here to help! We offer bookkeeping & accounting services as well as business services that are designed to bring success to your organization. Contact us here today to learn more!