Tax time can be overwhelming and stressful, but it should not be something you dread every year. Sure, ever-changing laws and rules are often confusing, the possibility of penalties cause fear and the paperwork seems downright unbearable, but there is hope.
In fact, I always tell clients and other business owners that one of the best remedies is to simply fall back on the basics. Run your day-to-day business in an organised, consistent manner and taxes will suddenly be more manageable.
To be specific, here are five tax tips we forget or take for granted all too often. But, if we follow them, tax time will be more bearable year after year.
1. Document everything
Keep a record of daily transactions and make it as detailed as possible. Are you an on-the-go, busy entrepreneur? Rely on smartphone apps to track spending, scan receipts and back up files in the cloud. This way, you can verify business expenses are accurate and legitimate.
You should also maintain records relating to your tax liabilities and any election, choice, determination or calculation made under a tax law, including the basis on which any were made. Penalties may be imposed to businesses who fail to keep proper records.
2. Stay organised
One of the reasons small businesses have a hard time getting through tax time is the fact that their tax documents are unsystematic. It is important to have an organised system for filing so sorting by expense type is easy. You can also utilise the cloud for creating a storage system and keeping files updated.
3. Take advantage of deductibles and offsets
The easiest way to save money for small businesses is to be aware of itemized deductions and offsets you can claim. Here are some of the common tax write-offs and rebates you can report to reduce taxable income:
Travel & entertainment (including meals, airfare, auto costs and lodging)
Clothing (including laundry and dry-cleaning expenses of uniforms)
Health insurance (depending on your income level)
To avoid being audited, review these deductions carefully.
4. Set reminders
It’s easy to lose track of deadlines in the middle of tax cycles. Having a calendar to remind you of important tax schedules like making local, state and federal tax payments helps you avoid unnecessary tax penalties. Engaging in year-round tax planning also can aid in easing your taxable income for the year. It helps to review your strategies regularly.
5. Enlist help from a professional
You don’t need to do everything yourself, nor should you. Committing a mistake could cost you and your business more time and money. Do not hesitate to seek assistance from your accountant or tax professional to discuss extensive tax issues and other areas outside your proficiency. A tax expert can help you assess your tax situation and improve it in the next financial year.
Bottom line: There is no reason to dread tax filings. With consistency and organisation, you’ll save your sanity and time and money. Make these changes in your business immediately. The effort put in today will pay off when it is time to file.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.