In the US, tax time for everyone is here. We asked our Zintro experts to provide some tax tips that small businesses should know about or take advantage of.
Kenneth Reid, an expert in small business accounting, says that he sees many small business owners who start their business on the fly without any thought as to how they will track and account for business income and expenses. This means that these business owners may have no idea if they are profitable or not. “After the first year in business, owners may think they are profitable because they have some money in the bank. However, they might not be able to easily pull the information together to get their tax returns done because they have not kept accurate records,” says Reid. “They might not be able to come up with receipts for legitimate expenses or be able to tell what their actual income was for the year because the owners may have contributed funds to the business to keep it going; thus, these funds are mixed with actual income earned by the business.”
Reid points out that these types of mistakes can be extremely costly to small businesses. “Small business owners need a good accountant who is familiar with their type of business. The expense of hiring an accountant in the very early stages of starting the business is an investment in the business, which will save them money and headaches down the road,” he says.
Reid provides these tips to working with an accountant:
- An accountant can help the small business owner feel confident in the ability of the business to grow and become successful.
- Talk to the accountant before making any kind of large purchase. The accountant can provide pointers and tips on the financial consequences of making large purchases that include tax consequences and other issues that owners may not be aware of that could hurt or help the business.
- An accountant can work with owners around financial planning and tax planning strategies for the business. “This should happen after the first couple of years of being in business,” says Reid. “The business has to become established for a period of time so that trends develop and the accountant can see what guidance he needs to provide to help the business grow.”
Stuart Sobel, an expert in tax consulting, provides these 10 tax tips and thoughts for small businesses:
1. Tax planning is like fire prevention and tax preparation is like arson investigation.
2. Accept that saving on your taxes is not immoral, unethical, or unpatriotic.
3. Understand that a dollar is worth more today than it will be tomorrow; defer income and accelerate deductions.
4. April 15th is not tax day when you are in business – every day is tax day.
5. Realize that while software and tax preparers are good, you pay the taxes. Learn about the taxes you pay and be your own tax advocate.
6. Tax saving is like working on a puzzle: the whole is the sum of the parts.
7. Be the right form of business entity for the business today not what someone has prescribed best for all businesses.
8. Is the business your life or livelihood? Look at your tax return like it was an x-ray or MRI. Be your own doctor of financial health.
9. Customers are not clairvoyant. You have to spend money to make money.
10. The IRS is not a threat to achieving success in your business, you are.
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