Article by Julie Morris
Most small business owners love being in business for themselves, but these feelings are complicated when tax season rolls around. The complexities of taxes stress out small business owners and force many of them to hire expensive tax professionals to get through the tax filing process. The good news is, there are steps these business owners can take to simplify tax season and make it less stressful, and some of these steps may help them feel confident enough to complete and file their own taxes.
Purchase the right tax software
Small business owners do not need to know the ins and outs of the tax code in order to complete their own taxes. In fact, many small business owners are realizing that the right tax software includes the tools they need to make the tax filing process more manageable. The key is finding the software that has the features you need without paying for those that you don’t. And, some tax preparation software is designed for larger businesses and actually adds complexity to tax season for small business owners, so make sure that you consider only those programs that are designed for small business owners.
For small business owners, tax software that generates 1099s and W-2s and other related forms is typically enough for their business tax needs. These more basic programs are easier to use and are designed to simplify selecting payees and forms and entering data to complete tax forms quickly.
Know your deductions
Don’t be afraid to take legitimate deductions. Small business owners are sometimes afraid that taking deductions sends a red flag to the IRS, but that is not the case. If you can support the deductions with the proper documentation, you should take them to help your finances. If you use your home office solely for your business, you are entitled to deductions. Technology purchases, office equipment, office supplies, travel costs, and some entertainment and dining costs qualify for deductions, so be sure you are maximizing your tax savings by knowing what you can and cannot deduct. If you are unsure about deductions, consult a tax professional. In some cases, the cost of hiring a tax professional who knows how to find all of your deductions pays for itself and saves you money in the long run.
Organize your records
Keeping good records and organizing them throughout the year can save you a lot of time and hassle at tax time. You should have a filing cabinet dedicated to tax documents and forms, an electronic scanner that digitizes all of that paperwork, or a tax software program that incorporates all of your records. No matter which record organization method you use, you need to be consistent in your record keeping and bookkeeping all year long so that you can pull out the documents quickly and easily when it comes time to fill out forms or hand over records to your tax professional.
Contribute to a small business retirement plan
Use your time wisely
The end of the year is a good time to start preparing for tax season. Waiting until April is not a good idea for anyone, but it especially spells trouble for small business owners. Track your expenses, take stock of inventory, and be sure that you have had employees fill out the proper forms before the end of the year, so that you can go into the new year and tax season as organized and prepared as possible. The threat of penalties and interest charges for missing the tax filing and payment deadlines should be enough to motivate small business owners to start preparing early.
While tax season never will be completely hassle-free, you can make it less stressful by purchasing the right tax software, knowing your deductions, organizing your records, and using your time wisely. Being prepared ahead of time is the best thing you can do to make the next tax season easier on yourself.
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