As a business owner, the tax season can be very stressful. This is mainly because many people tend to procrastinate preparing your tax returns until the last minute.
Taxes should be prepared throughout the year; this helps you to avoid unnecessary stress and mistakes.
You can greatly reduce the headaches that come during the tax season by implementing efficient tax saving tips.
Smart business tax saving tips for 2019
Below are some tax saving tips that you can use during the tax season.
Avoid IRS penalties by using payroll tax software
According to reports by IRS, approximately one-third of businesses are fined yearly for handling tax payrolls wrongly.
This is mainly because many business enterprises handle their employees payrolls on their own: by using spreadsheets and paper without third party assistance. You can avoid this by using payroll tax software.
This application efficiently handles all your payroll needs in good time.
Separate your personal finances from your business finances
This is a common mistake for many small business owners.
It is of paramount importance that you have a separate credit card account and business
checking account. This will simplify things for you when making deductions for taxes and managing books of accounts.
When the IRS audits your company, it is important that you furnish documents in support of your business expenses.
Set time to organize your books of accounts
If you do not allocate time to organize your accounts, chances are you will not do it on time.
You should set aside a few hours each month to put all your paperwork and accounts in order. This will greatly help you to avoid last-minute preparations of accounts and paperwork.
During this time, you are required to reconcile your credit card accounts and bank accounts to match your receipts. The receipts must be matched with bank statements.
Use accounting software
Accounting software makes the tax season bearable for managers and business owners.
They help you effectively claim all your deductions at once. Once you update and sync the application with your firm’s expenses and business revenue, financial statements are easily created. After doing this, you can send the statements to tax or CPA professionals for analysis.
This makes it very easy for you to file tax returns.
Receipts are important for keeping tabs on your firm’s cash flow.
You can use these receipts to make deductions on your taxes. You may enjoy specific tax deductions depending on the structure of your company. There also deductions that are made across all business structures.
By keeping receipts, you are able to keep a record on expenses that are subject to deductions during taxation.
Deduct your home office
Normally, most business owners conduct business from their home offices.
Few business owners realize that they can deduct home office expenses from taxes. These expenses include mortgage interest payments, insurance, repairs and utilities such as internet service.
However, you are required to determine the section of your home that is dedicated for business. These tax deductions can benefit both tenants and homeowners.
Deduct car expenses
If you want to benefit from this incentive, you must calculate the time you use your car for work.
After calculating, you can make a certain deduction to all your car expenses. There are two categories available for this deduction:
- Your actual vehicle expenses including gas, insurance, and repairs.
- The standard mileage rate provided by the IRS.
You should pick the option that will save you more money.
Some credits or deductions are eligible to be carried over into the next financial year.
This is because they are not fully used during tax deductions. Net operating costs, charitable contributions, home office expenses, and capital losses are some of the credits that can be carried forward. You can use computer software to track these deductions in case you forget.
You will greatly reduce the stress of running a business by implementing the above measures. By carefully accounting for credits and investigating your options, you are likely to come across numerous other alternatives.
These savings are a big help to your firm.