TAX PLANNING: 5 CHALLENGES YOU NEED TO BE PREPARED FOR

 

Taxes are an essential part of running a business, working as an independent contractor, and being employed. While taxes may not be everyone’s favorite to-do item, preparing for tax planning as a small business doesn’t have to be stressful.

There are a few things you can do to set yourself up for a quick and easy tax season. No matter how you earn income or how complex your tax situation may be, this guide has a few easy tips to help make planning for taxes easier for your company.

Here’s your guide for everything you need to know about taxes for small businesses and how to prepare for your company’s taxes like a pro.

1. PREPARING FOR TAX PLANNING STARTS WITH ORGANIZATION

The key to staying on top of your taxes is being organized. Staying organized throughout the year will help you immensely when it comes to preparing your taxes.

If you’re missing items, unorganized, or failing to stay on top of deadlines, not only will you be stressed but you can also cost yourself a lot of money.

Start the year off right by keeping your tax documents organized throughout the year. Don’t leave all of your receipts, tax forms, and paperwork in a big pile until April 14th.

Stay on top of your document and paperwork right from the start. This might take a little more effort than just keeping a pile as well. The more organized you can keep your documents, the better equipped you’ll be to back up your itemized deductions and file on time.

Keep it simple by taking photos of receipts or documents on your phone. You can keep them in a digital folder in addition to a drawer or organization folder at your office or home.

While there is no need to spend hours each day organizing your files, just a few minutes every week will save you a lot of time come April.

2. STAYING AHEAD OF YOUR BUSINESS TAXES

Procrastination is a problem in any arena of life. Taxes shouldn’t be any different. Stay on top of tax season by literally staying on top of your taxes throughout the year.

People tend to want to put off things that aren’t pleasant or fun. Putting off your taxes, however, will only add to the unpleasantness. Not only will you run the risk of being late but you will also be more likely to make mistakes and miss deadlines.

Waiting too long to file your taxes just makes for more stress and more missing pieces. Staying organized might also make you dread tax timeless. The more you are prepared, the less likely you will be to procrastinate.

3. ADJUST YOUR WITHHOLDING

Do you give yourself a salary as a small business owner? Don’t forget to make adjustments for big life events such as marriages, childbirth, changes in your job, or even pay raises. The IRS website lists all of the qualifying life events to take note of for the salary you give to yourself.

Make sure you stay on top of adjustments when you need to make them. Your new little bundle of joy can bring a nice little bundle at tax time so file accordingly.

If you fail to properly account for life changes you may have the wrong amount of taxes withheld. This can result in a larger bill at tax time and potential penalties.

You also never want to overpay. While this is true in life in general, at tax time this is especially important. Overpaying means the government is making interest on your income instead of you being able to claim your money yourself.

4. CLAIM THOSE BUSINESS CREDITS, DEDUCTIONS, AND CARRYOVERS

When it comes to credits and deductions, make sure you double-check what you qualify for. Don’t assume your business isn’t eligible for a tax credit or deduction. Also never assume that you just don’t have enough deductions to itemize things.

At the front end of the year, take a look at potential deductions and then you will know what receipts or paperwork to keep throughout the year to back them up.

Remember to also keep track of carryover items. Often times, benefits can carry over into the following tax year. If you didn’t claim the entire credit and forget about them, you’ll lose this money.

Let’s say you had a capital loss over the deduction limit and you have an excess in charitable donations your company made. If you forget about this, that likely means you didn’t track the carryover amount and you didn’t claim it this year.

5. MISSING TAXES: TRACK CORPORATE PAYMENTS AND MISSING ITEMS

One problem many people run into at tax time is forgetting to report items. There is a lot that goes into preparing taxes for your business so this is an easy mistake to make.

If you receive a subsidy to help you pay for your company health insurance, for example, don’t forget that this subsidy is just an estimate made at the beginning of the year. If something changes during the year that alters your income or your qualifying status, you need to notify the health exchange to make the adjustments.

One of the most important things to remember when preparing taxes for small businesses is not to miss your payments and filing deadlines. Whether you are a large or small business, missing your payments can cost you a lot of money.

If you forget to make your payments or you make them late, you may face stiff penalties. Read more…..