Tax planning elicits sighs and strikes fear in the hearts of small business owners everywhere. And let’s face it: April 15 is still months away, and no one wants to even think about taxes now.
But that’s the point: Spend some time thinking and planning now, and you can be sipping cocktails on tax day next year.
Fox Small Business emphasizes that the goal here is having no surprises when tax filing time rolls around. Anticipating and preparing all year long—and especially having mid-year checkpoints—will help keep you focused and moving along that path. But even if you haven’t done much planning up until now, no worries: You’re still ahead of the game and moving forward.
Assuming you’ve been tracking your business income and expenses throughout the year, putting your P&L statements on a spreadsheet will enable you to use those numbers to project sales and expenses through the end of the year. Be sure to take into account seasonal fluctuations in revenue—but also in expenses. One you’ve made projections, factor in future tax transactions like depreciation or expensing capital purchases. At this point, consulting with your tax professional for more detailed tax planning steps like calculating self-employment taxes, if you’re a sole proprietor or part of a partnership. Because of almost constantly changing and complicated tax laws, it’s pretty much impossible to go it alone!
Small Business Information offers five quick, year-end tax tips for small business:
These tips apply differently to every business situation, accounting method, etc. So to keep your business’s tax situation on the right side of the IRS, be sure your tax advisor is involved throughout the year—and especially, at year-end.
And while we’re on the subject of taxes, Small Business Information also outlines ways for small business owners to avoid being audited.
While it’s true the IRS tends to audit less than it used to, the government is still concerned about the estimated hundreds of billions of dollars in under-reported business income and unpaid taxes. Audits are expensive and time-consuming; you just don’t want to be there under any circumstance. So regardless of the size and type of business you have, it pays to keep your tax advisor close and your finances on the straight and narrow.
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