Congratulations on your first year of business. You’ve done things you never thought yourself capable of doing. You’ve created plans, executed strategies, worn multiple hats, and pushed yourself to the limits of sanity.
But you made it! The year is done. You can relax now, right?
Well, not exactly. Now, it’s tax season, and since you have a business, your taxes just got more complicated. This is likely uncharted territory for you, and you’re going to be learning a lot of new things.
You Shouldn’t Wait Until the End of the Year
The tax season might not officially start until the year is over, but as a business, you should be tracking your tax information throughout the year. That includes financials, expenses, potential deductions, etc. The best way to make your tax life easier is to record and document everything.
Additionally, if you’re a sole proprietor, partner, or S corp, you should be paying quarterly estimated taxes. If you don’t, you could get penalized at the end of the year.
The specifics on what to pay and how to do it is best left to a professional accountant, which brings us to the next point…
Get a Professional Tax Accountant
It’s possible you do your taxes all by yourself or with the assistance of some free software. Those days are behind you. As a business, it really pays to have a tax professional help you navigate the requirements, deduction possibilities, forms, etc.
There are literally thousands of tax laws, and making a mistake could lead to fines or worse, an audit by the IRS. If you don’t know who to use, ask around for referrals of accountants or CPAs.
Understand What You’re Doing (as Best as You Can)
Once you bring in a professional, it can be tempting to just let them do all the work while you sit back. After all, that’s what you’re paying them for, right?
While that’s true, it’s in your best interest as a business owner to understand what’s happening with your earnings. This way, you can better prepare for the next year while potentially spotting additional deduction opportunities.
Speaking of deductions…
Be Wise with Deductions
Some people go into their first year of business taxes thinking they can deduct everything. Want a new TV for your house? Deduct it! Need a new car? Just call it a “company car.”
Great ideas…if you want to be audited by the IRS.
Deductions are watched closely, and they need to be justified. Specifically, they need to be expenses regarding your business, and only for your business. Should you use something for business and personal, the general rule is to only deduct the percentage for which that object is used for your business if at all.
But don’t make that decision on your own. Consult with your tax accountant.
What Kind of Business are You?
How your taxes are done depends on what type of business you are. If you’re a sole proprietorship or partnership, then your business taxes are filed with your personal taxes. Generally, the same goes for an LLC, though you can file your taxes as a corporation, if you want.
Corporations are taxed separately, and they’re do a month earlier (in March). Of course, you can get some additional time if you really need to.
But again, consult with your tax accountant.
If Needed, File an Extension
Running behind on your tax returns? You can always file for an extension. They’re pretty much a guarantee, and they’ll give you some extra months to finalize things.
Most small business will use the personal tax extension form (IRS Tax Form 4868). If you’re a corporation though, it’s a 7004. Either way, the due date for extension applications is the same as what your taxes would otherwise be. But again, consult with your tax accountant.
That way you can put more focus on growing your business. Want to grow your business faster/better/more successfully? We can help with that. Check out our course Odds Makers to improve your planning and strategy.
And if there is one thing you should take from this post it’s this – consult with your tax accountant!