Anyone who is trying to start or operate their own business knows that things can change in an instant- company policy changes, ever shifting political environments, the ebb and flow of markets. The only thing in this world that is constant is change, and “nothing can be said to be certain, except death and taxes.” A self-employed individual who fails to keep up with current tax standards may find themselves learning these facts the hard way. Failure to comply with IRS policies may lead to fines, penalties, and eventually criminal charges. In this article we will discuss how to avoid any problems during tax season. This information will help you Survive Death and Taxes for Self-Employed Business Owners.
Classify your business correctly- It’s important that when starting out, you consult an attorney and an accountant to make sure that your business is classified correctly. C Corporations, S Corporations, LLP’s, LLC’s and Sole-proprietors all have different tax requirements and benefits. Failing to classify your business correctly could result in you having to pay more taxes.
Hire an accountant-
Small businesses need an accountant that works all year long with them. A good accountant will help small business owners by:
- Keeping track of business income and spending
- Monitoring cash flow
- Keeping an eye on the net and gross profits
- Offering advice to help your business continue to grow
If you use the same accounting firm for payroll as well then you must make sure that they take care of payroll taxes because if they do not then you will be stuck with the bill.
When tax season rolls around you will be happy that you had a close business relationship with your accountant because doing so will save you time in the long run and money when paying taxes.
Take advantage of deductions and credits-
The IRS offers a number of deductions and credits that can significantly lower the amount that you owe. Examples of deductions include those for expenses related to a home office, and charitable giving. Credit may be available if your small business offers healthcare for employees, or if employment is made possible for those with disabilities. Itemized deductions for businesses include expenses such as entertaining clients, work clothes, meals, and business mileage on a vehicle. Be sure to keep track of these expenses and categorize them correctly so that claiming the deductions is not a headache.
Keep adequate records-
Work with your accountant to ensure that adequate records are kept for all business transactions. Records such as financial statements serve as proof for deductions and can ensure that your tax return is correct. Staying on top of this all year long can prevent a last minute rush to fulfill tax demands and in turn prevent mistakes from being made.
Separate business and personal expenses-
In our previous article- Most Common Bookkeeping Mistakes– we discussed how important it is for business owners to have a separate bank account and credit card for all business transactions. It goes further than merely reaping the benefits of organization. Failing to separate the two can not only make tracking business growth more difficult, but it can turn filing your taxes into a catastrophe. On top of that, if your business is audited by the IRS and they find that your personal and business finances are mixed, then they may have grounds to begin looking into your personal accounts as well.
Request an extension-
If you are like many of us, it is easy to get overwhelmed with the many ongoing demands on our time and attention. Don’t be afraid to file an extension if needed. Filing an extension can give you a little extra time to make sure that you file correctly.
Taxes are a part of life that few, if any, enjoy. It can be overwhelming and traumatizing if you’ve been audited before. However, it may encourage you to know that according to Chron.com, only 2.5% of small businesses are audited each year. With the help of a good accountant and good organizational skills, you should have a filing experience that is mildly inconvenient or unpleasant at most. One way to put a positive spin on filing is that it forces you to collect information that can help make wise decisions that can benefit your company.
Omnis offers flexible accounting services that can cater to your specific needs. Whether you are looking for a year-round relationship or just need a quarterly clean-up, our remote services can be customized to ensure you receive exactly the kind of service that you need. Omnis guarantees speedy service and flawless financial support. Our mission is to break the mold of a traditional bookkeeping service. We offer all the services you need to keep your business running efficiently, but with a friendly and dare we say it, enjoyable, twist. Let us help you get back to your dream job!