5 Small Business Tax Tips You Need to Know
There are around 31.7 million small businesses operating in the US. One thing that all of those businesses have in common is that they must file taxes.
For sole proprietorships that function primarily as pass through organizations, that often means filing one return a year as part of your personal taxes. For other businesses, filing annual taxes is just the last step in a quarterly process.
Of course, all businesses want solid ways that they can manage taxes as part of their business finances. If you want to keep your small business taxes reasonable, keep reading for five tax tips you need to know.
1. Use an Accountant
Unless your taxes prove exceedingly simple, you should use an accountant to put together and file your business taxes. It’s a straightforward way to catch problems before the forms go off to the IRS. An accountant is also in the best position to find you tax deductions you might not even know exist.
2. Retirement Contributions
If your profits look like they may run a little rich and drive up your tax obligations this year, you can soften that blow with contributions to retirement accounts such as a Simple IRA or a SEP IRA. You can use those contributions, within the established contribution limits, as deductions on your taxes.
3. Strategic Purchases
Most business owners are aware of depreciation that they can write off on their taxes. There is another way if you want to take a big bite of your taxes. Section 179 deductions like you write a purchase as a lump sum on your taxes.
Some of the qualified equipment includes computers, office furniture, and even vehicles over 6000 pounds. You can head over here for a Section 179 vehicle list.
4. Keep Good Records
No matter how skilled of an accountant you use, they can only work with what you provide them. You must keep good records in terms of bookkeeping and receipts. Make it a priority for yourself and your employees.
5. Use Software as a Sanity Check
Even if you do use an accountant for your formal tax filing, that doesn’t mean you must just roll with it. You can use tax software ahead of time as a sanity check. It can give you a fairly accurate picture of what your taxes ought to look like for the year.
Then, if your accountant comes up with a substantially different number, you can ask for an explanation.
Small Business Tax Tips and You
The tax tips above give you a starting place for managing taxes for your business. You should always aim to strike a balance between the practical and the beneficial. Yes, a vehicle purchase may help you write off a lump sum, but it only makes sense if you actually use the vehicle for your business.
By the same token, an accountant offers a practical counterbalance to your desire to write things off that might fall into gray areas.
Looking for more business finance tips? Take a look at the posts in our Business section.