Is this your first time filing taxes as a small business owner? Well, congratulations on running and owning your own business for a year now! Starting a small business can be liberating. There is nothing like the feeling of taking something you are truly passionate about and turning it into reality.
However, in the excitement of starting and launching your own business, suddenly you realize tax season is almost upon you and you feel like you haven’t done enough to prepare in time.
Managing a business is no small feat and taxes are part of the job scope when you’re working for yourself. You could always outsource your tax requirements to businesses that specialize in taxation like taxfyle.com/small-business-tax-filing, but it is also important to grasp the basic fundamentals of what your tax obligations involved.
Taxes Are the Responsibility of Every Business Owner
Every business owner has an obligation to file their taxes. Handling your tax affairs in a prompt and timely manner will save you from incurring any penalties with the IRS, and it makes the tax filing process a lot smoother when you don’t leave everything to the last minute.
Even if you have a tax accountant that you enjoy working with, when you have a basic understanding of what your tax responsibilities are, you’re not at a loss when it comes to tax time.
Understanding what is going on will minimize the stress you feel when the tax deadline is fast approaching.
Tips to Keep You On Top of Your Tax Requirements
As a new small business owner, here is everything you need to know about your tax requirements to get you started:
- Get to Know Your Forms – The first thing you want to do is understand your business type and the forms you need to fill out based on your business type. This will absolutely help you avoid costly mistakes in the future and getting into trouble with the IRS. Filing the wrong tax return because you were not sure about what business structure you fall under is opening the door for an unnecessary tax problem to creep in.
- Go Through Your Expenses and Revenue in Detail – When you’re going over the details of your expenses and revenue, you want to be sure to take your time. Go through every single detail with a fine-toothed comb and never skim over the thing because this will only lead to costly mistakes. A good tax professional knows how important it is to make sure every detail in your documented expenses and revenue is correct to, again, avoid future problems with the IRS. Missed steps and a lack of information are easy mistakes to avoid. When choosing to work with your tax professional, pick a professional who is very detail oriented. Another thing you need to make sure of is that all your income is reported. Unreported income is a big deal that the IRS definitely frowns upon. Excuses are not something the IRS will entertain either. The IRS deems it your responsibility to accurately report your income and anything that gets overlooked or forgotten will be chalked up to negligence on your part. Do a thorough review of your books and make sure no detail has been left out, no matter how small that detail may be.
- Be Detailed with Your Tax Deductions – A lot of new businesses get excited over tax deductions that they end up letting their tax deductions trigger an enquiry by the IRS. These are also sometimes known as audits. One mistake to avoid with this section is to not claim any deductions that are not associated with your business type or type of industry. Personal expenses are also an area you need to be careful with. When you’re running your own business, a lot of your personal expenses can sometimes cross over into the business world too. This is one example of a scenario where it is going to be worth working with an experienced tax professional. Another mistake that could trigger the IRS’s suspicions is when you claim large tax deductions that seem unrealistic because of the nature of your business or the industry that you are in. You want to be very careful when you go about claiming your tax deductions and if you are ever in any doubt, consult your tax professional about it.
- File Your Taxes Regardless of Your Revenue – Even if you had $0 in revenue for this financial year, you must still file your taxes as a small business owner. As a new business owner, you probably had more expenses than profit in your first year. You will want to be able to write off those expenses because it could help to reduce your taxable income. However, you won’t be able to do this if you don’t file your taxes at all.
Finally, seek out the help of a professional tax accountant who specializes in small business taxes. A qualified professional is “qualified” for a reason.
They spent years studying and familiarizing themselves with the tax system. They know the tax requirements like the back of their hand, and working with a tax professional is how you leave yourself free to focus on the other aspects of running your business. Working with a tax professional who is familiar with your industry type is one of the best business decisions you can make for the good of your business.
While you now know the basic requirements of what your tax obligations are (and that’s a good thing!), your tax professional will be able to do a much better job at the end of the day.
The information you have gathered here today is to help you understand how your small business tax obligations work so you will never have to scratch your head again as you wonder where on earth you should begin. The last thing you want is to risk messing up something on your tax form and incurring a penalty that could have been avoided.
File your taxes properly and you can avoid any surprise or unwanted visits from the IRS.