It’s not everyone’s cup of tea to run a business, as it’s hard to file taxes and run business-related matters. Maybe tax season is the time that gives shivers in the spine. Most business owners find tax-related matters difficult and don’t want to spend their time here. If you are aware of the taxation methods, then there are multiple forms that you need to fill out. Apart from this, you should know the time frame when you need to file and pay taxes. If you don’t keep track of the time and take one wrong move, you could be on the hit list of the IRS. So, if you want to avoid these things, read this essential guide that will explain.
What are the top three ways to navigate tax season?
“We will increase the tax audits of small businesses by 50% in early 2022.”
Yes, this is the official statement released by the IRS; that’s why you need to fasten your seat belt and learn tips and tricks. Apart from this, due to COVID law changes and tax-related matters are more complicated than ever. So, in the presence of recent regulations, you can’t dodge an audit. So, sometimes all these things become a little overwhelming for people who are just starting a business. Most importantly, time is the main thing, and you are supposed to do everything on time. Thus, here are the top tips that will help you navigate tax season/time.
1st: Research tax deductions of small businesses as per structure:
The way you register your business impacts tax filing and deductions. But you should know that some systems enjoy more tax advantages than others. For instance, here are different forms of business:
- Sole proprietorship (A typical business structure)
- LLC (Another most common business structure)
- C Corporation (A traditional corporation)
- S corporations (Helps to avoid double taxation by passing income directly to the shareholders)
So, make sure the registration type of your business because every structure comes with different tax implications. For instance, some forms are eligible for double taxation, and some aren’t. Thus, if you already have proper knowledge, you would be in better condition to enjoy advantages. Apart from this, operating a small business and having a long list of tax deductions will indeed reduce taxes. You can deduct business meals, marketing costs, rent, and travel expenses.
However, you can deduct all these things, but it entirely depends on the eligibility rules. Thus, make sure to read directions to maximize tax deductions on your tax returns. So, as an owner, it’s your responsibility to prepare things ahead of time to save your precious time. Above all, timely planning will keep you safe from penalty fees.
2nd: Seek professional help:
It is an expensive solution but surely helps the newbies. If, as a business owner, you think that things are overwhelming, then you can seek professional help. So, it’s your accountant’s job to manage all financial matters on your behalf. Most importantly, professional service helps a lot if you want to keep track of time and avoid late fees. Here are the following duties that your accountant is supposed to perform on your behalf.
- Help to separate business and personal finances
- Pay quarterly taxes on time
- Handle organizational matters and help to understand startup cost deduction
- Help to organize and compile all documents, and you don’t need to do this daunting task on your own
- You remain aware of the tax penalties, time, and exact filing dates
- Update the data by filing a 1099 pay stub for independent contractors (For this, you may have to submit a W-9 form
Note: Hiring a professional is expensive, but starting, you can take help to learn tax-related matters. But if you want to do everything on your own, then get the software. You also have an option to seek help from the IRS for tax filing as they provide this facility for free to certain people.
3rd: Keep an eye on quarterly tax payments:
Tax-related matters demand timely actions, and you need to stay updated all the time. In this scenario, we can take the example of quarterly tax deductions. If you look back in time, you can remember that your employer used to fill out the W-4 form for you. So, the same thing applies here, and you need to fill up the W-4 form and calculate quarterly tax payments. However, you can use a real pay stub maker to keep track of tax deductions and expenses for this purpose. But if you fail to do so, then the IRS will charge an additional amount as a late fee. Above all, here is the list of other taxes that you need to account for as small business owners:
|Includes federal income tax withholding, social security, and Medicare taxes
|Taxes in the account of excise duty
|It applies if you deal in products like gasoline, liquor, cigarettes.
|Imposed by local and state governments
|In the case of commercial property
|You need to pay this to the city or country where your business is located.
So, these are small yet vital details that you shouldn’t overlook to avoid penalty fees and late payments. But you have an option to go for a helping hand to keep track of all these things.
Due to COVID, there is a change in tax law, and now it’s acting on new regulations and rules. This legislation aims to save the small business owner from the impact of COVID. So, PPP (Payroll protection program) is a loan that many small business owners have taken. But you can take advantage of these legislations if you keep yourself updated. So, don’t forget to check your taxation software regularly to stay on top of new tax developments. In this way, you can get benefits from new rules. Moreover, timely and proper information keeps you safe from the late fee.