If you are running a small business, it is essential to take proper care of your taxes. Without the right prep and follow-up, you could end up owing money to the IRS, which isn't a place where you want to put yourself or your business. When it comes to taking care of taxes, it is about what you do all year long, not just at tax time.
Work with An Accountant
If you are not a financial expert, don't handle all the finances yourself. This isn't your household budget; there are rules, laws, and regulations you have to follow regarding how you handle your money as a business. That is why you are going to want to hire an accountant. They will make sure that you pay the right taxes on your payroll and save money to take care of your taxes. They will provide you with valuable insight into how your business is doing from a financial perspective, allowing you to make smarter financial decisions throughout the year. An accountant can help you stay on a strong financial footing with small business tax preparation.
Report All Income
Don't assume that the IRS isn't paying attention because you are a small business. You need to track all income that you receive. You need to make sure you report each 1099 that you receive as a business. Even if a client doesn't provide you with 1099, do your job and report that income. Not reporting all income can get you into trouble with the IRS, which is why it is best to be honest from the beginning.
It is easy to pay for things with debit and credit cards and not pay attention to what you are paying for. That may work in your personal life, but it doesn't work as a small business owner. You need to pay for things and keep track of what you are paying for.
Keeping accurate records of what you are paying for will allow you to know what to deduct when it comes to tax times. Those records can help lower your taxable income and help you keep more money in your pocket. That is why you need to track everything and know not just what purchases you made but why you made each purchase.
It is important to keep your business and personal expenses separate. You should make all of your purchases using your business debit or credit card.
Know How to Classify Your Business
Third, working with a professional to classify your business correctly is essential. You can classify your business in various ways, from a sole proprietor to a limited liability partnership. How you choose to classify your business will impact what you pay for your taxes and how much you have to pay. You will want to work with an accountant and an attorney to get your business properly classified.
When it comes to taking care of your taxes as a small business, you will want to work with an accountant regularly, track everything, and correctly classify your business. Taking care of your taxes is about your actions throughout the year, not just when you are sitting down and doing your tax paperwork.