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15 Tax Tips Every Business Owner Should Use

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accounting tips for businesses

Just because it’s not tax season doesn’t mean we can’t still learn about the tax process. Taxes are often the bane of the business owner’s existence. It’s an uncomfortable and stressful time, but it doesn’t always have to be. While limiting tax stress is impossible, these tips can help you make yearly tax filing smoother.

Here are some excellent tax tips to consider for next year’s filing.

Expenses

Keep your personal and business expenses separate. This seems like a no-brainer, but business owners constantly blur the lines between credit cards and bank accounts. The more different you keep these expenses, the more accessible tax filings will become.

Filing Foreign Income

Always file your foreign income verification statement ahead of time to avoid any nasty t1135 penalties.

Tax Accountant

Hire a tax accountant who is familiar with your type of business dealings. It’s cheaper in the short run to do taxes by yourself, but hiring someone outside the business to look over your financial information can save you a lot of cash and time in the long run.

Tax Laws

Always staying up to date with tax laws and regulations for various states is of utmost importance for individuals and businesses alike.

Tax laws are subject to frequent changes, influenced by economic conditions, political decisions, and evolving fiscal policies.

Failing to keep track of these updates can lead to costly consequences, including hefty penalties and interest charges for non-compliance.

Example

For instance, businesses selling products to customers in California need to be aware of the CA sales tax nexus, as it determines whether they are required to collect and remit sales tax to the state.

Understanding and complying with California’s sales tax nexus rules is crucial to avoid potential penalties and ensure proper tax collection and remittance.

Estimated Taxes

You also need to know how to estimate taxes work. Estimated taxes are a common problem among people who run small businesses. In the first year of business, it’s okay to not nail your estimate taxes perfectly, but every year after, if you’re not within 10% accuracy, you can end up paying annoying fees.

Family

If you hire someone within your family to work for your business, you should ensure that the relative does everything the other employees do. Otherwise, this can be viewed as nepotism, and you may incur legal troubles.

Health Credit

You can claim a health credit if you have less than ten employees with average wages of less than $25,000 per person. You could carry the credit forward if you did not owe taxes during the filing year.

Deductions

Deductions are the best aspect of taxes. They’re a fantastic way to quickly get back cash or reduce how much you owe. If you have any appreciated stock contributions, you can deduct those appreciations from your taxes.

Organization

Always stay organized. Keep accurate records. Print off all essential documents and file them appropriately. You should always be prepared for an audit in case there is one. Staying organized will help you to file your taxes sooner and more accurately. Create a filing system if you do not have one to stay on top of your taxes all year.

You can stay organized by setting aside a few hours each month, or one hour a week, to keep your papers organized. Make this a habit.

Accounting Software

Use online software to track the revenue you’re bringing in and all expenses. A great tool in QuickBooks Online that will make staying organized much more accessible. Come tax time, you can transfer your information for a pain-free process.

Home Office

A lesser-known deduction is the home office deduction. If you have a home office, you should cash in on this. Measure out your room and report the square footage of it divided by the footage of your house and the total cost of living. Just make sure that this is only a workspace. Sometimes during an audit, the IRS will want to see a picture of your office for proof. If there are kids’ toys or a DVD rack, it will not count.

Vehicle

There’s also an auto expense deduction. The deduction counts for 54 cents per mile as of 2016. This can be handy if people often drive in your business.

There are even food-related deductions. You can deduct half of your food expenses if you have wined and dined clients or held an office party.

Administrator

Hire a credible outside administrator to deal with providing your employees their 401(k) plan and any other tax benefits your employees receive. These administrators include Vanguard and Fidelity.

Affordable Care Act

Understand how the Affordable Care Act works. The Affordable Care Act is constantly changing as political parties disagree on how the nation’s health care should work. This means that rules continuously change, which could negatively or positively affect your business. Ensure you talk to an accountant knowledgeable about national health coverage to guarantee an accurate filing.

A million tax tips can benefit your business, and your accountant will know more and help your filing go as smoothly as possible next year. Here are fifteen that every company should be aware of to get the most significant return possible or save money if they are required to pay more.

File On Time

Avoid penalties and interest by filing your taxes on time. If you can’t meet the deadline, request an extension to avoid penalties, but remember that you still need to pay any taxes owed by the original due date.