Tax season is just about here, and for small business owners, it’s important to stay on top of your responsibilities to make sure you’re compliant with all tax rules. Thankfully, your accountant can provide all the business owner tax tips you need to ensure a smooth filing process.
Many small business owners mistakenly assume that because they are “small potatoes” in comparison to larger entities, the IRS won’t pay much attention to their taxes. However, there is evidence that the IRS has actually increasingly targeted small businesses for audits in recent years, which just adds to the importance of having accurate and timely tax filings.
Here’s a quick look at what you should know about taxes as a business owner before filing this coming year:
- Business structure: Make sure you select the legal structure for your business that is most suitable for your operations. Every type of business structure has different types of tax implications. Depending on the structure you choose, you may or may not be shielded from personal liability, and may have different forms to fill out. Selecting the organizational structure is one of the earliest phases of business formation, but it’s worth reviewing around tax time too.
- Deductions: Want to minimize your tax responsibility? Make sure you’re taking full advantage of the deductions for which your business qualifies. These might include deductions for business expenses like rent on business property, utilities, vehicle expenses, contract labor, supplies, equipment, asset depreciation and repairs. Your tax professional can help you determine what deductions you should seek out.
- Possible quarterly payments: You might find it beneficial to make quarterly estimated tax payments rather than a single lump sum (if you will owe). These payments are due every April, June, September and January on the 15th of the month. Business owners often have limits with cash flow that can make it a hardship to pay the entirety of their tax responsibility all at once, so spreading the responsibility out over the course of four payments can make it much less challenging.
- Potential business taxes: There are a variety of business taxes for which you might be responsible. These include self-employment taxes, excise taxes, payroll taxes, sales taxes and property taxes. Be sure to work with a tax preparation professional so you can prepare for your tax liability in advance and not be thrown for a loop when you receive your tax bill.
- Write-offs for startups: Startups often make the mistake of not taking full advantage of their deductions. There are unique write-offs specifically for brand new businesses that allow owners to deduct various startup costs. For example, the IRS allows entrepreneurs to deduct up to $5,000 in business startup costs and $5,000 in organizational costs, so long as total startup costs are $50,000 or less. Costs incurred by startups could include business cards, office supplies, office space, business insurance, loan fees, professional fees and real estate.
It’s not too late to get prepared for tax filing season. Contact our team at Lion Rex ATA Inc. with any questions you have for our tax preparation professionals or to get more business owner tax tips.