As a new entrepreneur it’s natural that you would feel hesitant about your taxes. Business taxes always sound so complicated when other people talk about them. Here’s the good news, taxes do not have to be your downfall. Here are some tips to help you get out ahead of them and keep things on track so that you don’t have to worry about audits or angering the IRS.
Work with a Professional
Ideally you will have the money to hire an accountant to manage your taxes for you. That way you won’t have to worry about them at all. If you can’t afford an accountant to manage your finances throughout the year and at tax time, there are other resources available to you. For example, when you e file with liberty tax (or a similar service that’s available in your area), you simply answer questions that the software asks you and it calculates your tax rate and what you owe for you. These businesses also offer you audit protection so that if a mistake is made you can simply send the IRS to them instead of having to sort it out yourself.
Keep Track of Everything as it Happens
It takes less than a minute to log a receipt into your budgeting and accounting software. Take those 45 seconds now. If you let your receipts pile up you risk making mistakes—potentially costly mistakes.
PRO TIP: Write the business’s name, what you bought and how much you paid for it in ballpoint pen on the back of every single receipt. Most receipts these days are printed with evaporable ink (it’s better for the environment). This means that in a couple of months when you go hunting for that receipt from that business dinner, all you’ll find is a blank slip of paper. Writing in ballpoint pen keeps that from happening to you.
Actually Read the Book
Read the helpful guide that the IRS publishes with every form. These booklets aren’t a waste of trees, they are filled with valuable information on what you can claim and how to claim it. Familiarizing yourself with the rules will help you—not just at this tax time but for future tax years as well. If you have questions about what you read go ahead and call the IRS. The people there are helpful and would rather you asked them directly than simply guessing and hope you do things right when you file.
Pay Your Quarterly Estimated Taxes
It’s tempting to wait until the end of the year and then just pay everything you owe at once. This is not the way to go! Paying throughout the year (use the EFTPS) helps reduce the burden on your budget and avoids a penalty if you underpay. And—if you accidentally pay too much into the system, you’ll get a refund. You used to have to mail in certain forms each quarter but now you can go online and pay when it is convenient for you.
Filing your taxes doesn’t have to be the huge burden that it appears to be when you start out. In fact, if you’re careful and diligent throughout the year, doing your taxes ought to be nearly painless!
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