For many entrepreneurs, taxes are scary. You don’t want to be audited, it’s tough to get answers to your questions, you’re afraid of how much you’re going to owe, and the bottom line is… this stuff is not why you started your business in the first place.
However, if you want to keep your business and keep making money, it’s absolutely essential you get smart about taxes. By taking a few simple steps, you can feel knowledgeable and in control when tax time rolls around.
- Know the tax structure for your type of small business. Most small businesses fall into one of the following categories, each of which has its own tax forms and considerations. These link to the IRS forms for each:
- Make Bookkeeping a Priority Throughout the Year. Just by keeping regular track of income and expenses, you take half the stress and headache out of taxes. Use online bookkeeping software to make it easy on yourself like Freshbooks or QuickBooks. If you keep books on your computer, make sure you back up regularly.
- Be prepared with quarterly estimated tax payments. Sole proprietors, partnerships, S corporation shareholders, and self-employed individuals, are required to make estimated tax payments if you expect to owe $1,000 or more in taxes when you file your return. After estimating the amount you will owe for the year, and dividing that into four separate payments, you file electronically in April, June, September and January, in addition to your annual filing the following April.
- Get employees and contractors ready. First you’ll need to know whether you have employees or contractors. If you have any of either, you must have an Employer Identification Number, and your contractor must have completed and filed a Form W-9. Set those up at the start of a contract relationship when you have them sign your agreement, so that it’s in place before the end of the tax year. Then, you’ll need to file a Form 1099-MISC (in most cases) for contractors.
Read more about taxes when it comes to employees.
- Keep track of business expenses. By simply keeping records and receipts for the cost of goods sold, your capital expenses and your personal expenses for business purposes, you’ll be ready to zoom through everyone’s favorite part of filing taxes – your deductions! Try one of the handy apps out there for keeping receipts like Shoeboxed. Remember to keep those files for at least three years in case of an audit.
Taking these five steps, you’re taking nearly all the stress out of taxes. You’ll feel prepared and know what you’re getting yourself into before tax season arrives.
If you’re still stressed by accounting, record keeping, or taxes, you can always contact me. I’m here to help you achieve financial success!
To your life without limits,