As a small business owner, tax filing season can be an incredibly stressful time of the year. Between trying to make sure all your paperwork is in order and understanding the ins and outs of the law, it’s easy to feel overwhelmed by taxes — especially when you don’t have an accounting background. But with a few helpful tips and tricks, you can reduce the anxiety associated with filing small business taxes.
In this article, we will provide 10 tips every small retail shop owner should keep in mind to make tax filing as stress-free as possible. From setting up a simple bookkeeping system to taking advantage of tax deductions, these tried-and-true suggestions are well designed to help make everything about taxes go just a little smoother for you.
1. Make Sure You Are Organized Before You Start Filing. It’s always a good idea to ensure you’re organized before you start filing your taxes. Gather all the necessary documents, such as bank statements, receipts, and other financial records. You should also ensure that you back up any important digital files, such as invoices or statements, that you might need when filing your taxes. Having everything in order will save time and hassle. Plus, not wasting time searching for documents frees you up for more important tasks like strategizing for the coming year.
2. Choose the Right Business Structure. Your chosen business structure can have an important impact on your tax filing obligations. For instance, the type of business structure you use will determine the amount of taxes you owe, the filing and tax payment deadline, and the types of tax forms you must complete. Examples of business structures include:
- Sole proprietorship
- Limited liability company (LLC)
- C Corporation
- S Corporation
- Partnership
As a small business owner, it’s important to select the right structure so you can minimize your tax burden, avoid potential penalties from the IRS, and ensure a smoother filing process. Consider meeting with an accountant or tax advisor to ensure you select the best structure for your particular situation. Once you’ve chosen a business structure, it’s important to understand all the related tax implications. This will allow you to properly plan for any required tax payments and avoid surprises when it comes time to file your taxes.
3. Keep Track of Your Expenses. Keeping track of your expenses is essential for small businesses. Not only will you better estimate the cost of doing business, you’ll also benefit from tax deductions and credits. Having a clear record of your expenses will make filing taxes less stressful, and ensure you can claim all your entitled deductions. A handy way to keep track of your expenses is to set up a spreadsheet or use a business accounting software program that can help you organize and manage your finances.
Other ways include:
- Creating a budget
- Setting up an expense tracking system
- Keeping all receipts and invoices
- Tracking employee expenses
- Keeping track of mileage
4. Use the Right Software To Help You File Taxes. If you’re a small business owner, filing taxes can be tricky and stressful. But there are ways to make the process easier – like using the right accounting software. Having the right software can help you save time, prevent errors, and ensure you get all the deductions and credits that you qualify for. It’s also a great way to keep track of your financials throughout the year, so you’re not scrambling in April. So don’t be afraid to invest in good accounting software — it can save you a lot of headaches and cash in the long run.
Here’s a list of accounting software options to consider:
- QuickBooks
- Xero
- FreshBooks
- Wave
5. Get Expert Help. If you’re overwhelmed by the complexity of filing taxes or have specific questions, don’t hesitate to get an expert on your side. Professional tax advisors specialize in helping small businesses save money and maximize deductions. Plus, they’re familiar with the latest changes to the tax code — so you don’t have to worry about filing incorrectly or missing out on potential savings. Even if it costs a bit of money upfront, getting help from a tax professional is often worth it in the long run. So don’t be afraid to seek out an expert if you need help — it’s one of the best tax-saving tips a small business can follow.
6. When it comes to filing taxes as a small business, one of the most important things you can do is separate your business and personal expenses. Keeping track of your business expenses correctly will make filing taxes much simpler for you. Separating your personal and business finances can help avoid double taxation, deduct expenses from your business income, and take advantage of tax credits. Plus, you’ll be able to track your business’s financial situation more accurately. As a small business, you’ll want to ensure that all your business-related expenses are separate from your personal expenses, so you can clearly see the money coming in and out of your business.
The best ways to separate business from personal expenses include using the following:
- A separate business bank account
- A credit card for your business
- The right accounting software to manage expenses
It’s also important to take the following steps:
- Register your business
- Keep track of all shared expenses
- Add yourself to the payroll
7. File on Time To Avoid Penalties. Filing your taxes on time is the most important tax-saving tip for small businesses. Not only does it make filing less stressful, but filing on time can also save you from hefty penalties. Late filings can be costly and take away from your bottom line. Plan ahead, organize your financial records, and file as soon as possible to avoid unnecessary fees and aggravation. Doing so will ensure you are in compliance with the IRS and avoid costly penalties.
Tax deadlines are dates by which you must file your taxes and make any payments associated with them. For individuals, the deadline is usually April 15th. For businesses, it depends on the type of business structure and the date of incorporation.
Examples of tax deadlines include:
- April 15th – Federal income tax filing deadline
- April 15th – Deadline to make estimated tax payments
- October 15th – Extended tax filing deadline for C Corporation
- October 15th – Extended tax filing deadline for individual
8. Claim Any Applicable Tax Credits. As a small business, you can claim certain tax credits to help reduce your taxable income and lower your taxes. A few common tax credits include the Work Opportunity Tax Credit, the Credit for Small Employer Health Insurance Premiums, and the Earned Income Tax Credit. Claiming any applicable tax credits is a great way to save money on taxes and make filing less worrisome. Be sure to discuss your eligibility for any potential tax credits with your tax advisor or accountant.
A few common tax credits include:
- Work opportunity tax credit
- Credit for small employer health insurance premiums
- Earned income tax credit
- American opportunity tax credit
- Child tax credit
- Saver’s credit
- Recovery rebate credit
- Mortgage interest credit
9. Take Advantage of IRS Programs and Resources. The IRS has a wide range of programs and resources that can make filing taxes as a small business much easier. For example, you can use their e-file and Direct Pay services to file your taxes electronically and get refunds in as little as eight days. Additionally, they offer helpful tools like the Tax Withholding Estimator, which can help you manage the amount of taxes you owe. Finally, they have various educational programs to help business owners learn more about filing taxes. Taking advantage of these programs and resources can make filing your taxes seem much more straightforward.
11. Section 179 Deduction. The Section 179 deduction is an invaluable tax-saving tip for small businesses. It allows you to write off the cost of eligible business property during the year of purchase, up to $1 million. This means you don’t have to wait until the property depreciates before taking a deduction. Plus, it’s a great way to reduce your tax burden. So if you’re a small business owner looking for some extra relief during tax season, the Section 179 deduction is an excellent option.
Final Thoughts
No one likes doing their taxes, but it’s an essential part of being a small business owner in the US. We hope these tax tips help make the process a little easier for you and your accountant. From separating business and personal expenses and filing on time, to claiming tax credits and taking advantage of IRS programs, you can optimize your taxes with these helpful tips. With the right knowledge and preparation, tax season will seem far less daunting. If you want to learn more about how to run a profitable retail store, visit headquest.com today. We have the resources, insight, and advice to help you optimize your business.
