Running a business is hard enough without adding the complexity of filing taxes each year. However, there’s a lot you can do to reduce anxiety and confusion.
Doing taxes might sound simple but it often becomes more time-consuming than some business owners realize.
1. How To Prepare Taxes for Your Business
The best way to begin the year is with last year’s information and reviewing what is different in the tax code as well as what changed in your circumstances.
Know the dates
Sole proprietors, LLCs, and corporations with a December 31st fiscal year-end have April 15th as their deadline, but other businesses have different deadlines. If you need more time, you can file for an extension for up to 6 months.
Keep adequate records
Don’t underestimate the power of good bookkeeping. Consider setting aside time each day to work on your company’s records. If you do it well all year long, you’ll have much less work to do when actually preparing your return or having someone do it for you. Having everything ready and available will also result in lower fees if you decide to hire a professional to handle your taxes.
Build a relationship with your tax preparer
The key is to work with your accountant throughout the year, not just when you prepare your tax return. You will avoid making the wrong financial decision and maximize the odds of lowering your tax bill. Also, get more Money heist season 3.
Hire the right person
Your accountant should work with you throughout the year to track income and spending, help you avoid having a cash flow problem, and monitor your gross and net profits. A good accountant will give you advice on how to grow your business and take advantage of tax deductions and credits.
2. Business Tax Tips and Deductions
Claiming legitimate deductions is an important income tax strategy for small businesses. Even Warren Buffet knows that a penny saved is a penny earned. While deductions lower the taxable income, tax credits are a sort of reward to small businesses for strengthening the economy, improving lives, and benefiting the planet by cutting the actual tax they have to pay. This is why credits are a bit better as every dollar of credit cuts your tax by a full dollar but both of them benefit your bottom line.
General business tax credit
There are several individual tax credits designed to motivate business owners to undertake specific activities, such as purchasing electric vehicles.
Green investments
Many green investments can help you qualify both for tax credit and a tax deduction, although rules change every year. However, even if a green investment is not eligible for any tax benefits, it will still save you money through reduced UI CT monthly costs.
Credits for health insurance premiums
The credit can be up to 50% of the premiums you paid for health insurance coverage under a qualifying arrangement, or, if you’re an eligible tax-exempt employer, up to 35%. But, there are several conditions to fulfill such as having less than 25 employees within the tax year.
Alternative motor vehicle
An example of this credit is the $8,000 that encourages the purchase of an alternative fuel source vehicle but keep in mind that it does not apply to hybrids or electric vehicles. For example, Mercedes-Benz 2012 F-Cell that uses hydrogen fuel-cell technology is eligible, along with a few other vehicles.
New markets credit
This credit is given to organizations that help low-income communities by creating jobs or adding value through educational or healthcare facilities. Your project must be located within an area that has a 20% poverty rate or with median family incomes that don’t exceed 80% of the area's median income.
R&D
Although this tax credit is very complex, domestic research and development are rewarded if it applies to developing a new or improved product, patent, technology, etc.
Takeaway
Once you finish your business taxes, it’s tempting to avoid thinking about them again until next year. However, what you should do is think about ways to improve and set yourself up for an easier process next year. Let’s face it: taxes won’t go away. But, there’s plenty you can do to make the whole process a little easier every year.
