Few taxpayers look forward to April 15 but if you run an online business, you likely dread it more than most. Not only do you have to worry about the income you personally earned in the previous year, you also have to account for the money you paid employees, the income your business earned, and any losses your company suffered.
As the deadline looms closer, putting off your taxes will only cause undue stress. Here are a few things you can do today to make tax season easier for your small business.
Find Your Deductions
Deductions are an important part of tax reporting for small business owners since they reduce the amount of taxable income. If you haven’t registered your business as a separate entity, be sure you separate your personal deductions from those related to your business. The IRS lists these deductions on its website, including standard mileage rates, which can vary from one year to the next, and healthcare credits for small businesses. If you run your business from a home office, you can claim that space, using the guidelines listed online by the IRS. It’s important to carefully follow the rules for claiming a home office since the IRS can sometimes flag these deductions for an audit if the claim looks suspicious.
Find an Accountant
Individuals often avoid hiring an accountant to save hundreds of dollars in fees, but the amount is often well worth it for a small business owner. One reason is that professional accountants keep up with the rules pertaining to business owners and can act as a much-needed adviser. This accountant can also consult with you throughout the year on things you can do to reduce your tax burden. If your business is making money each month, you’ll likely want to pay quarterly, which requires estimating what your taxable income will be from one year to the next. Most importantly, though, by handing taxes over to a qualified accountant, small business owners will be able to put the hours they would have spent working on taxes into building and growing their businesses.
Tax time easily helps business owners see the flaws in their current systems. If you’re relying on a stack of crumpled-up receipts and an Excel spreadsheet, it might be time to invest in automation software. Tools are available that will let you capture your receipts using your smartphone camera, pulling that information into your bookkeeping system. You can also use invoicing software that integrates with your bookkeeping solution, creating an environment that makes tax time easier. Before you visit your accountant, you can create reports that provide the necessary information. Those reports will not only save you the time you would have spent manually putting your information together, but they’ll be likely to be more accurate than if you relied on less automated processes.
Tax season can be a stressful time for small business owners, but with careful preparation, you can make next year’s taxes easier. For this year, an accountant can help you pull everything together and identify deductions you might have missed. This will not only help you pay less in taxes, but it could prevent a time-consuming and stress-inducing audit.