When asked to name the one aspect of their business they find least appealing, business owners invariably choose ‘taxes’; not just paying them, but everything that goes along with them including recordkeeping, understanding the tax code, finding deductions, and filing. But taxes don’t have to be taxing and business owners sometime make things more difficult than they have to be. Here ways to make it all easier:
Simplify Your Recordkeeping
When tax filing time rolls around business owners begin the scramble to organize receipts and records with most of the time spent on separating the business expenditures from personal ones. The most straightforward way to straighten out your recordkeeping is by keeping your transactions completely separate all year long. It begins by opening a separate business checking account. The process is made even easier with a separate business credit card. Even if the business can’t qualify for its own credit card, a personal credit card can be completely dedicated to business purchases.
Know Your Deductions
When business owners become aware of all of the ways that the business can generate tax deductions, they tend to arrange their recordkeeping and their whole mindset around tracking those deductions. For instance, knowing how the home office tax deductions work will encourage the strict monitoring of the business use of home resources; understanding the Section 179 deduction for equipment purchases will ensure that proper documentation of those purchases is filed away and you maximize its tax benefits. Educate yourself about the basic business deductions and use them to lower your tax bill.
Hire a Bookkeeper
The key to simplifying the annual tax filing process is to maintain an accurate monthly accounting of business revenue and expense. A good bookkeeper can be hired on an outsourced or virtual basis, for a few hours a week that can keep your books current and accurate, thus eliminating this problem at tax time.
Hire an Accountant
Accounting fees can be expensive, but if you follow steps one through four, the amount of time an accountant will require to complete your taxes should be minimized. Using a CPA ensures that you have competent representation should you ever find yourself in an audit or other tax situation and you’ll have expert advice about how to minimize your tax liability, not to mention someone has the burden of preparing your taxes. They can also advise you about how to maximize the income your take home from your business in a tax-advantaged way.