Running a small business is no walk in the park. In fact, it can be an all-consuming pursuit that causes you plenty of stress and sleepless nights. Of course, it can also be the best thing you ever do for yourself, both professionally and financially speaking, if you play your cards right. It’s certainly nice to be your own boss and realize the personal fulfillment that comes from seeing your business succeed based on your efforts. But money is often an issue, and you’ll have to wear many hats in the beginning, and perhaps for the long haul. And when it comes to finances, and your taxes in particular, you may find that you’re not well-equipped to carry the burden.
Luckily, you can get help from a variety of sources, including tax prep specialists and software solutions uniquely qualified to assist small businesses when it comes to getting their finances and taxes in order. Still, if you’re aware of common tax issues that many small businesses face, you’ll be better prepared to spot and avoid them. Here are a few potential problem areas you’ll want to watch for.
One of the biggest mistakes small businesses come up against in regards to their taxes is overpaying, closely followed by the second mistake: underpaying. And both can cause major complications for your business. If you overpay, you run the risk of putting your finances in jeopardy. The money you’re mistakenly giving the government could be earning interest for you, at the very least. But it could also be the sum that would have tipped the scales in your favor and kept your doors open, depending on how tenuous your financial position is. Underpaying, on the other hand, could result in major fines and even an audit if the IRS gets wise (and they usually do). If you’re worried that you’re overpaying, you’ll simply have to adjust your estimates. And if underpaying is the problem, it’s probably time to make the switch to quarterly estimated taxes (if you haven’t done so already). In both cases, the right accounting software should help you to better monitor your income and expenses so that you can pay your taxes accordingly and stay out of trouble.
Another major issue for many small business owners involves keeping up with changing tax laws, and they tend to change annually. You probably don’t have the time or the inclination to research these laws and how they affect you, but you don’t really have to. Your tax prep specialist should have all of this information on hand to help you out, which is why it’s so important to find a CPA that specializes in businesses like yours and has the experience to make sure you’re in compliance with all applicable laws and that you aren’t missing out on any funds that should be coming back to you.
This brings us to another big snafu: failing to deduct. In understanding the small business tax laws that affect you in is imperative that you pay special attention to the write-offs you can claim. This allows you to track applicable costs throughout the year so that you can get the appropriate deductions and come out owing the IRS the smallest amount possible. Whether you hire your CPA buddy to help you or you rely on a pro from a reputable firm like Bowman and Company, the best thing you can do is talk to your tax prep specialist about deductibles so that you don’t miss out on any tax breaks coming your way. As a small business owner, the bottom line is particularly important, and it’s crucial that you do everything in your power to keep your tax payments as low as possible.