Taxes are messy. It doesn’t matter if you’re filing on behalf of a large corporate business or you’re filing for your family, there are a lot of things to consider.
Fortunately, services like LegalZoom can make sense of even the most complicated personal and professional situations when it’s time to file your taxes.
But what about the rest of the year? And what if you’re trying to stay on top of business taxes, but you’ve never owned your own business before?
It doesn’t matter if you’re a one-man operation running out of your garage, if you’ve started making money on a blog this year, or if you have employees and an office, these tax tips are essential for new business owners of all kinds.
Plan for Estimated Quarterly Taxes
People who work a traditional job for someone else don’t really have to worry about their taxes throughout the year. They are automatically taken out of each paycheck.
If you work for yourself, that isn’t the case.
You may assume that you just pay your taxes at the end of the year, but you couldn’t be further from the truth. You’re actually required to pay quarterly taxes.
It is important to know how to estimate your quarterly taxes, and how to make your quarterly payments. That way, you don’t have to pay any fines or interest on no or too-low payments.
Stay on Top of Your Finances in Real-Time
At home, you probably throw everything into a box or a folder on your computer and sort through it all when tax time rolls around, if you do that at all. Many people just have to wait for their W-2s to come in the mail after the first of the year, and that’s the extent of their tax situation.
That’s not the case if you have a business.
You’re spending and making money all the time. That can leave you with a huge pile of receipts at the end of the year that can be a nightmare to sort through. Not to mention, leaving everything until the last minute means things are going to fall through the cracks.
It’s important to track every single expense, and it’s important to track those expenses in real-time. It will save you time and money when tax time rolls around. Not to mention, the professional filing your taxes will be happy you’re so organized.
Keep Track of Everything You Use for Work
If you’re new to being your own boss, you may not realize just how many things you can deduct on your taxes.
Keep track of every single thing you use for work throughout the year. Everything you use to enhance your business can be written off on your taxes. A few of the top tax deductions for small businesses include:
- Vehicle expenses
- Cell phone expenses
- Internet expenses
- Office supplies
- Home office or rented office space.
- And much more.
When it doubt, write it down. Then, you can ask your tax professional what can be deducted, and what can’t. It is recommended to use tax software such as Drake Hosted on Cloud Desktop to keep an track of your taxes.
Understand Carryover Deductions
Most of us aren’t fortunate enough to be able to meet with the exact same tax professional each and every year. Even if you do, you can bet they have many clients they meet with on a regular basis. They won’t remember every detail of your financial situation.
That’s not a big deal when it comes to new deductions, but it can cause some serious problems if you have carryover deductions.
For example, you may decide to file the cost of a new computer over a span of a few years to maximize your deduction, but it only works if it’s taken each year. That’s why it pays for you to remember your own carryovers.
Think About Retirement
You may not think your business is making enough money for you to start thinking about saving for retirement, but it’s a good tax-saving strategy.
There are always tax benefits to utilizing certain retirement accounts, even if those strategies change. Before tax time rolls around, speak with a professional about the things you need to know about starting a retirement account, and how to contribute to get the most bang for your tax buck.
Taxes can be scary, but they are especially scary if you’re starting your own business. These five tips will help you understand what you need to do throughout the year to stay on top of things, so filing taxes after the first of the year isn’t quite so intimidating.