Taxes are an expense for your small business. Of course, since paying taxes is the law, it is not an expense that can be eliminated, but this cost can be managed. Here is some advice for how best to file taxes in a way that can reduce your tax burden and streamline your efforts.
Use the Right Accounting Software
Doing taxes manually and without any technological assistance is time-consuming and can lead to both errors and over payment. Using the right accounting software can make the difference between panicking at tax time and being able to sit back and relax. Automating the process both removes the human element and can eliminate many of the mistakes that you do not even realize that you make. Your accounting software will provide the inputs into your tax return and give you numbers that you can plug directly into the IRS forms. The proper software will ensure that your expenses are properly tracked, which will help you compute your true income and deductions.
While the temptation may be there to save money, experienced tax preparers can help your business. You do not necessarily have the same expertise that a preparer would have, and any one piece of knowledge can mean the difference between a refund and a large tax bill. In other words, investing in the right software and expertise can minimize your role in filing your own taxes. While you may want to do as much as possible on your own, tax returns may be an area where less is more.
Use Uncommon Deductions & Tax Breaks
Nobody wants to pay the IRS a penny more than they have to, so you should utilize all possible deductions within the letter of the law. There are many deductions that tend to get overshadowed but are fertile ground for small businesses to save on their taxes. For example, business startup expenses are deductible under certain circumstances as are some organizational costs. In addition, many people forget that home office costs are deductible too. Finally, some fees paid to professionals such as lawyers and accountants may also be deductible in the year that they were paid. You or your accountant should aggressively comb through IRS regulations to maximize your deductions.
While taxes are a certainty and the law must be followed, that is not to say that you should pay unnecessary taxes. There is a way to do your taxes that can make your life easier and possibly save you some money.
If you want to improve your financial literacy, let J Snow help! We offer webinars and other services to help you get to where you want to be financially.