While tax day comes once a year, successful business owners know that tax planning is a year-round activity. To minimize taxes, you must plan your financial transactions carefully, and create and follow processes to track relevant information.
These tips can help you improve your tax preparation:
Retool your system during tax season
One of the best times to change the way you track expenses is when you are gathering information for filing. At that point, you are most familiar with any shortcomings in your system, whether it is a receipt-filled shoebox or a tax software package. Pay particular attention to the documents your accountant says are missing from your current return; create a system to store and retrieve these materials easily.
Another reason to create a good expense tracking system is to be better prepared in the case of a lawsuit or audit; having ready access to organized back up material can save you time and reduce the stress that may be involved in retracing your steps.
Manage cash with taxes in mind
Even successful companies may owe money at federal tax time. While it may not be as exciting to budget for taxes as it is for marketing programs or hiring, savvy business owners know that it is essential. To help facilitate paying quarterly tax installments throughout the year, you should plan your cash flow around this bill. Savvy small business owners recommend setting aside a certain amount of money each month, based on your previous year’s tax liabilities. Budget for owing taxes even if your company is not profitable – your taxes are based on income minus IRS-approved deductions, not your revenues minus all your expenses.
OPEN Tip: To simplify record-keeping and tax filing, keep your personal and business expenses separate. Having a charge card for just your business expenses can help ensure easy record-keeping through year end statements and can serve to keep you on a budget by paying off all charges on a monthly basis.
Start keeping track of business expenses with The Gold Card from American Express OPEN. Apply now and we’ll waive the annual fee for the first year, a savings of $125.
The information in this article is intended as a reference tool. You should consult with your tax advisor as well. Time invested in tax planning and preparation can pay off in business savings and improved systems that can serve your company this year and in the tax seasons to come.
Photo: OPEN Cardmember Marta Maxwell, Airparts Company Inc., Ft. Lauderdale, Fla., Member Since: 1973 ?