GUEST ARTICLE BY: How to Have a Stress-Free Tax Season: Tips for Business Owners
By Julie Morris, Life and Career Coach
You don’t have to look far to find someone touting the tax benefits of business ownership. But if you’re a small business owner, it probably didn’t take you long to realize that those claims seem to be grossly exaggerated. Depending on your business structure, you might be paying taxes as a business entity and also as an individual. Maybe you’re finding that all those wonderful tax write-offs aren’t as beneficial as they seemed. Whatever your challenge, there are a few things you can do to ease the stress of tax season.
Know What You Can and Cannot Deduct
If there’s anything more stressful than tax season for a business owner, it’s an audit. You’re focused on running your business; you don’t have time to submit all that documentation or worse, have a sit-down session with an IRS auditor. The first key to avoiding an audit is to avoid grey areas when it comes to deductions.
While you shouldn’t take unnecessary risks, you also should maximize all legitimate deductions. That’s why it’s so crucial to understand exactly what you can and can’t deduct. When in doubt, keep documentation and ask your accountant.
Enlist a Certified Public Accountant
You do have an accountant, right? If you don’t have an accountant, enlisting the help of a qualified professional should be your first priority. An accountant can help you determine what deductions are legitimate and help you minimize your tax burden. Plus, while professional tax preparation can be pricey, it’s well worth it to ensure that your returns are completed accurately.
Know the Difference Between Contractors and Employees
You may have contractors, employees, or both who help you carry out business activities. Knowing the difference between the two and treating them appropriately is key; you can be penalized and fined for misclassifying employees. Contractors are workers who are generally free to determine how, where, and when they work to a large extent, while employees may be required to clock in and work in a central office location.
There are other differences as well, so educate yourself on the ins and outs. Contractors are issued a 1099 at the end of the year, while employees are issued a W-2 reporting their earnings. But you’re not required to carry workers’ compensation or unemployment insurance for workers who are independent contractors. In either case, properly documenting payroll expenses and submitting the appropriate tax reporting forms is an important aspect of running a business.
Keep Detailed Records and Pay Quarterly Taxes
Unfortunately, owning a business means making quarterly estimated tax payments. If you have employees, you’re also required to pay quarterly payroll taxes. Staying up-to-date on these payments and estimating your amounts due accurately will help you avoid a surprise tax bill early next year.
Again, an accountant comes in handy here, as they can provide you with proper estimations and even coupons to submit with your quarterly payments. Or, to take the burden off of yourself altogether, you can enlist their services to handle your payroll and quarterly estimated tax payments while you remain hands-off.
Tax season, to say the least, is rife with stress and anxiety. But it doesn’t have to be that way. Make thorough record-keeping a regular priority, and use these strategies and tips to make next tax season run a bit more smoothly.
Image via Pixabay by geralt
Julie Morris, Author
4023 Kennett Pike
Wilmington, DE 19807