Prepare Your Small Business with These Basic Tax Tips
Why tax isn’t included in the basic curriculum in high school is beyond me. That’s why according to surveys like Small Business Optimism, the taxes is the number one cause of headaches of entrepreneurs owning small businesses. Now here we are again. We’re in a season most adults despise — — tax season.
To prepare you and for you to not lose your cool, we asked around amongst experts on how business owners can avoid last minute tax complications. We’ve come up with this list of tips:
Classify workers as employees vs. independent contractors — their distinction may not be obvious when you’re working with them inside the office, but when it comes to taxes, employees and contractors are worlds apart. For one thing, contractors are classified as self-employed workers. They submit invoices and worry about their own income taxes. On the other hand, employees have their income taxes handled by the accountant of the company they are employed in. That’s why for the latter, your company must withhold payments for Social Security, unemployment taxes and health coverage on behalf of the employee. If your records are not straight from day one between the two worker classification, your business may end up being penalized for not paying enough taxes for employees. Likewise, contractors may not realize they’re breaking the law as well with tax evasion.
Home office — because the growth of online businesses is projected to multiply in folds. The IRS now gives us a simple option to compute how much of our home expenditures can we deduct off our taxes. You just have to divide clearly the expenses you as an owner spend on personal and business. The rules keep on changing though, so you have to regularly check if your deductions are still within the limits. Another thing to keep in mind is that in order to be categorized as for business, a part of your home must be exclusively used for it and on a regular basis.
Keep organized records — there is no substitute to clean, detailed and well organized book-keeping. Your records must be kept straight all year round. Every invoice, payments and income must be filed accordingly so that you don’t miss any potential deductions and you don’t draw the ire of the IRS as well. You can hire the services of a 3rd party accountant such Tax Preparation West Chester in order to maintain an immaculate tax records.
Tax Deductions Shortcut — If you want to make sure that you’re able to squeeze in every bit of expense down to the cup of joe you consume during a conference, one expert say that it’s reasonable to not wait until you’ve built your business. You still have to value the opinion of a professional though. Do this and you’ll be surprised how much leeway you can pull from the IRS.
Do it yourself or hire a pro? — We’ll end this article with the most no-brainer mistake one can make as a business owner. As we’ve said, one can find services that offer book-keeping for a very minimal fee. Simply put, accounting services pay for themselves by not letting you pay some serious fines to the IRS.