Navigating Business Taxes: Tips and Strategies for Small Businesses

Managing taxes seems to be a daunting challenge for small business owners, especially when the tax season comes up. It may not be the best part of running your business, but it’s an obligation that needs to be fulfilled. Without knowing the nooks and crannies of your tax system, you may find yourself lost in it.

To prevent being frazzled, have a clear plan for the important areas of your tax landscape. It will allow you to learn more about your business’ tax system and can later improve the bottom line of your business.

With the help of this article, it’s a sure start. Here are some tips and strategies for navigating well into your taxes.

Keep Your Records Accurate

Starting a business needs a detailed, accurate recording of every transaction. The benefits of keeping your records accurate include better tracking of expenses, debts, and creditors. Moreover, this strategy can help you take unsecured personal loans online, among other loan products, and secure a good financial position to build up assets for capitalization.

Most creditors will look closer at your finances, especially for those loans that don’t require collateral. Having records will assist you in keeping track of those finances and avoid financial overturns.

Without accuracy in record-keeping, you’ll be disoriented when it’s time to pull some of it to reconcile your bank transactions and create financial statements. Having a thorough record of all the transactions will help you navigate the ins and outs of how your business works, especially when you’re going to file for taxes.

Keeping your records accurate will help you take advantage of what to put into your tax deductions. It can also give you an idea of what income you should defer and when to accelerate it.

To do this, make sure you have the right record-keeping software and keep intact all the receipts about your business transactions. Having the receipts can help you later in your tax returns and know what’s tax deductible.

Learn The Accounting Jargon

The dimension of accounting goes with a whole bunch of terminologies that every small business owner should know. Spending some time learning all the terminologies can help you level up your playing field.

Some business owners can overlook their gross income and net income. Learning the difference between the two can help you where to put the deductions of expenses and calculate your income before taxes or the net profit.

Here are some standard terms that are important when you file for taxes:

Accruals – this is recording a transaction in income or expenses, whether or not money is paid or received as long as the service is performed or the product is given. Accounts payable and accounts receivable are examples of accruals.
Revenue – the money your business earned after rendering service or selling a product.
Gross profit – this is the total revenue after deducting expenses of producing your product or the cost of goods sold.
Cost of goods sold – the expenses of doing business or the cost of producing your products.
Net profit – this is the total after deducting all operating expenses from your gross profit. Or the income before taxes.

Practice Business and Personal As a Separate Entity

The separate entity concept is the most fundamental notion every small business owner should learn. This concept practices that your business is a separate entity from you, the business owner. Hence, you should distinguish the personal expenses from the operating expenses.

In this way, you will properly account for all the transactions and can later apply what tax deductions must be appropriately allocated when you file taxes. Moreover, open a different bank account for your business entity so nothing can go wrong.

Save for Your Payroll Taxes

As an employer who owns the business, you are legally obliged to pay, withhold, and report the taxes for employment.

Here are some payroll taxes that every small business owner should know.

Personal Income Tax
Social Security Tax
Unemployment Insurance Tax
Medicare Tax
Employment Training Tax
Federal Income Tax
State Disability Insurance Tax

Learn the Recent Changes in Tax

Annually, there are some changes in the tax rules. Notably, during the COVID-19 pandemic, there have been tweaks to help businesses. As a small business owner, you should know what opportunities are still available, and you should prepare for those expiring ones, for they might bring you more tax expenses.

Small business owners should also look out for significant developments in the tax codes. If you stay on the line for these developments and changes, you can learn some valuable tricks for your tax minimization techniques that will help your business grow.

Seek the Advice of an Expert

Accountants have an intensive background in how the taxing system works. And a good accountant can help you grow your business at a quicker rate. Seek their advice on how to take large portions of deductibles and how you can strategize your retirement fund or bonuses for employees every year.

Teaming up with an expert can help you save from making huge financial mistakes. They can teach you what are allowable deductions and all the strategies and tips that you should know.

The Bottomline

Staying on the line for the tax system as a small business owner can be complex, especially with some recent changes you should adopt. However, if you map out and devise a good tax strategy for your business, it will help you navigate and move forward with favorable developments in the long run. Plus, with the help of these tips and strategies, sure, it’s a good head start.

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