Tips For Getting Your Small Business Through Tax Season

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Image source: | Tips For Getting Your Small Business Through Tax Season | One of the worst parts about running your own business is navigating tax season. It can easily turn into a last minute scramble for relevant documents, and can open you up to unfortunate penalties if filing goes awry. Even working with an accountant can be stressful if you’re not able to come up with the right documents or don’t have the right information on hand. This article will help you find ways to minimize stress during tax season and get off on the right foot for next year.

1. Get Help

A big mistake many small business owners make is thinking that, since it’s their business, they should be able to file taxes on their own. Wrong! Most of the time, it’s impossible to know all the hoops a small business will have to jump through during tax season. That’s why it’s a great idea to hire a good accountant. There is a difference between a good accountant and a bad one, and it’s important to know how to tell which one you have.

If swooping in near tax day and doing your taxes and preparing financial statements is all they’re offering to do for you, assume they’re not the right fit. A good accountant should also be prepared to work with a small business throughout the whole year, tracking finances and making sure you’re in a good place financially. Come tax day, they should be fully aware of your gross and net profits and should be around to help you fill out form 8832 to change your tax classification. Essentially, an accountant team such as Lean & Pannepacker should be able to relieve any financial worries you have, as long as you don’t have cash flow problems.

2. Keep Records

Another huge mistake made by small businesses is not keeping adequate records throughout the year. When you do everything on your own, it’s hard to maintain the discipline necessary to keep thorough records that are clearly labeled and easy to find for tax season. But doing so is absolutely necessary to make sure you come out clean. Not keeping good records could result in giving up possible deductions, or even opening your business up to being audited. If you have an accountant, they should be able to assist you with record-keeping, but having good accounting software can also be enormously helpful for day to day business.

3. Clarify Your Business Plan

Many small businesses avoid the tedious work of making a clear and effective business plan. But avoiding this crucial step of running a business can land you in hot water financially, personally and within your business. Work with your accountant to come up with a good plan that involves steps like saving for retirement and buying more office space. Having these expenses planned in advance will help you to be in a good place financially when tax season comes around, and makes it easier to stay calm when you’re in a tough spot.

4. Understand Income

A confusing aspect of running a business is the difference between net and gross income. Many businesses make the mistake of taking a gross profit to mean that business is going well, when their net income is really putting them in the negative. This can happen if the costs of production exceed the cost of the product, and it can come as a surprise when money is somehow being lost when a clear profit is being made. It’s vital to the growth of your business that you understand this difference and are able to apply that knowledge to tax season. Even if the truth is unpleasant, it’s better to face it now rather than get a bad surprise later on.

The words “tax season” might fill you with dread, and it’s hard to blame you if that’s the case. But it doesn’t have to be that way every year. Follow these tips to make taxes less stressful and more profitable for your small business.

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