When tax time rolls around, it's almost as if a collective groan roars across America.
But it doesn't have to be like that–not if you're an informed small-business owner. In fact, your tax burden doesn't have to feel so heavy on your psyche or your bank account if you know how to handle it.
In honor of tax season, we spoke with 26-year veteran small-business accountant Frank Gutta, who wrote the book, Must Know Tax Tips for Small Businesses, to help small-business owners navigate their taxes and best prepare themselves and their businesses for a smooth filing process. In addition to saving headaches, Gutta also helps savvy small-business owners save some money, too.
So what does it take to minimize what you owe and maximize your return?
Get organized and stay organized
Fundamentally, Gutta says, it all comes down to organization. That means learning to be a meticulous recorder, and keeping receipts and documents cataloged and sorted. If you hand over a box full of receipts and papers that looks more like something you'd find stowed away in a garage than an office, chances are it'll be a lot more difficult to sift through and guarantee you'll get the biggest return you can.
Plus, without staying up on your bookkeeping and filing, you risk not only losing out on deductions and adjustments, you also could be blindsided by the dollar amount on the taxes you owe, he says. Using a program like QuickBooks is an easy, accessible way to keep up on your company’s finances.
Stay in touch with your accountant
The tax code transforms at an almost unbelievable rate; roughly 400 changes are made to it each year, which means we average more than one alteration every day, Gutta says. That’s why it’s vital to have a trained professional on hand who not only can keep you apprised of the developments, but who also understands them (and what they mean for you).
With incentives changing so rapidly, investing in a specialist (like a CPA with expertise in small businesses) is the surest way to reap all the benefits your business may be entitled to. Meeting regularly, say, on a quarterly basis, with that accountant will also help; it will keep you on track and keep him or her informed. And don’t hesitate to ask questions, Gutta says.
Plan ahead and spend wisely
“The only way to maximize what you get back is to know what your numbers are,” Gutta says. That means comprehensive bookkeeping, but it also means forecasting (and sticking to) a spending plan that makes sense for your business.
By restricting your expenditures to only the tools, equipment and personnel you need, you’ll be able to routinely assess what you’ll owe and the deductions to which you could be entitled—better preparing you for March 15.
Learn to love Tax Day
Instead of dreading that mid-March day, treat it simply as another necessary deadline. As with any other long-term important project within your company, you should keep up-to-date records and set incremental standards, like routinely meeting with your tax professional and logging expenses as they happen.
If you aren’t scrambling to finish everything at the last minute, you’re far likelier to see a greater return, Gutta says. Scrambling leads to forgetting certain eligible deductions and other paperwork. Tax Day should be a landmark annual event to cross off your to-do list, not a burden to avoid. So take the time to prepare for it.
Know your deductions
There are deals out there geared specifically toward small-business owners that you should discuss with your accountant. Gutta offers these as some of the most accessible and commonly applied deductions.
- Logged travel expenses: If you hit the road for business-related reasons, note your mileage, parking, gas purchased, parking fees and the dates of your trip. You can claim the amount spent on your travels.
- Client entertainment expenses: Likewise, if you’re taking prospective or existing clients out for meals or drinks, record what you spend, where and when. These expenses are eligible for write-off, too.
- Phone charges: Calls you made for work purposes from your home or personal cell phone qualify as deductions. Keep track of business calls by holding onto bills, then subtract their sum from the taxes you owe.
- Young part-time employees: If you’ve got family members under 18 helping part-time at your business, add them to the payroll. Unless you run a corporation, salaries paid to under-18 employees or as part of a spousal business partnership are deductible.
- Office expenses: Whatever you buy to use in the course of your work can be added to your tally of office expenses, to then deduct from the amount you owe the government. Examples of these costs include new furniture and everyday office supplies. Keep dated receipts for these purchases, and your accountant can help you sort them out.
- Retirement contributions: If you are self-employed and saving for retirement with a SEP-IRA, you can deduct your contributions to the account.
Review your forms and ask questions
When your tax forms are all filled out and ready to go, it’s important to give them a second look before sending, Gutta says. You should have an accountant you trust help you prepare them, but as a small-business owner, your once-over is critical. Make sure you ask questions about what you don’t understand, and clarify anything that doesn’t make sense.
It’s OK to ask a second opinion if you’re skeptical about how much you owe, for example. The bottom line: Sign off on your forms only when you’re comfortable with their accuracy and completeness.
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Karlee Weinmann is an independent business reporter, who most recently covered business strategy for Business Insider. She frequently writes about hiring, marketing and small business.
Please note that this is general information and that you should consult a tax professional for specific questions and advice regarding your situation.
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