Tax Tips for the Small Business Owner
4 Tax Tips That Will Help Small Businesses
Want to avoid paying more than you should come tax time? Or a frantic last-minute search for missing financial records?
Small business owners have a lot on their plate, and can easily lose track of an approaching tax deadline or the information needed to submit their tax return at the end of the year.
Organization is key when preparing for tax time, as is taking advantage of the many tools and resources out there to support entrepreneurs. Set yourself up for success by following these four small business tax tips.
1. Commit to Clean Bookkeeping from Day One (Or Day One of the New Year)
Year-round, effective bookkeeping is the best way new business owners can minimize tax season stress. Get in the habit of conducting these bookkeeping tasks regularly: categorizing transactions, reconciling your accounts, and reviewing your profit and loss statements and balance sheets.
With the wide range of accounting software out there, there’s no reason to rely on time-consuming manual methods that leave room for error. All-in-one options like Xero or QuickBooks automate your most important bookkeeping processes, including:
Tracking expenses;
Tracking sales and income; and
Creating and sending invoices.
With your financial records all in one place and up-to-date, you’re better positioned to file your tax return on time and with more accuracy than collecting and compiling the information at year-end. Plus, if you need updated information for other business needs, like conversations with funders or your bank, you’ll have it on hand.
2. Capture Every Business Expense
Each year and every year, a percentage of small business owners claim less than half of their business expenses, largely because they don’t have a reliable system for documenting expenditures while on the go.
Cash in on claimable expenses by using a mobile app to record receipt data, track mileage and generate expense reports. MileIQ, Expensify or Receipt Bank are reliable options for tracking. As an added bonus, many of these tools sync with your all-in-one accounting software, making tracking expenses that much easier.
3. Separate Business from Personal
Anyone who’s asked us about small business tax tips knows this is our top advice for entrepreneurs. Right from day one, small business owners should clearly divide their personal and business expenses. Differentiating between the two will make it much easier to claim deductions on your tax return — and support those claims in case of an audit.
Here are our recommended steps to separate your business and personal finances:
Create a separate bank account for your business, and designate a credit card solely for business purposes;
Never combine business and personal expenses; and
If you have to pay personal expenses with business funds, transfer business funds to a personal account and then remit payment from the personal account.
Separate, separate, separate.
4. Always Consult with an Accountant
Not sure exactly what you can claim as a business expense? Wondering which accounting software to use or how to interpret local tax regulations? Consult with an accounting professional to put your mind at ease — well before the filing deadline! We can share numerous small business tax tips to put your mind at ease.
In addition to managing the nuts and bolts of tax preparation, regular meetings with an accountant will help you continuously bookkeeping practices and better understand the financial workings of your small business, which can lead to growth or pinpoint problem areas before they become larger and unmanageable.
These small business tax tips and the other organizational strategies you commit to now will promote positive relations with your local accountant — and the long-term financial health of your company.
Want More Small Business Tax Tips? Ask KeyLin
Keeping all the deadlines and documents straight can be challenging when running your own small business. At KeyLin, we’re excited to share our small business tax tips with you to make your life easier.
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