Get a head start on filing your business taxes with these 7 tips
As 2018 comes to a close, small business owners are preparing to close out their books and take stock of their profits and losses. It’s a great time to get an early start on your taxes and make any final tax-deductible purchases. Managing your federal taxes isn’t easy (the National Small Business Association estimates that 50 percent of small businesses in the U.S. spend more than 40 hours a year on this task), but these end-of-year tips should save you some time and hassle.
1. Give yourself plenty of time
Running a small business or side hustle is hard enough, so don’t add to your stress by putting off your taxes. Give yourself enough time and get started early — that way you won’t have to worry about missing important deadlines.
2. Find the right accounting software
Accounting software (for example, Quickbooks, Wave, and Bench) can take some of the manual work out of keeping your books. There are tools at every price point, so do a little research to find the best option for your business needs and your bookkeeping style. The right tool will make it much easier to keep accurate financial records, which in turn will help you prepare and file your taxes.
3. Separate and categorize expenses
Make sure to separate business and personal expenses. The easiest way to do this is with a dedicated business account; having all your businesses transactions flowing through one account will make it easy to export those transactions to a spreadsheet or your favorite accounting tool.
4. Gather your records and receipts
Do you have a shoe box in the corner with all your business-related receipts? Check out tools like Shoeboxed and Wave—they allow you to quickly scan receipts for easy storage and organization.
In addition to receipts, the accounting experts at Bench recommend keeping bank statements, invoices, payroll records, and any other documents related to income, deductions, or credits on your tax return.
5. Make any final tax-deductible purchases
Do you need to make a large purchase for your business? Depending on your income, expenses, and your plan for the coming year, it might be a good idea to do so before the end of 2018. Check out this expert advice from Michael Hanley, a CPA who specializes in tax planning for small businesses; he describes how to decide whether or not it’s worth making tax-deductible purchases now in order to take the deduction in the current tax year.
6. Send reminders for unpaid invoices
Merchant Maven suggests sending out reminders for unpaid invoices. Once all invoices are paid, you can accurately determine profit and losses.
In a perfect world, all invoices would be paid promptly and in full. If a client is unable to pay their debt and you have made efforts to collect, however, you may be able to write it off as bad debt.
7. If you formed your business in 2018, check out these added deductions
There are a handful of deductions designed especially for new businesses; you can deduct a variety of expenses related to investigating a business idea, preparing the business to open, and organizing your business. For example, deductible expenses include market research, identifying suppliers, training employees, travel, consultation fees, and a host of other costs. If you formed your business in 2018, take a moment to read more about these deductions and consider consulting a tax expert about them.
