Take the Sting Out of Tax Season with These 5 Tips
No one likes paying taxes, but the process is more complicated for small business owners and entrpreneurs than for those who work for employers. In many cases, your tax obligations increase as a small business owner because you’re paying additional taxes that were once paid by your employer.
That’s why it’s important to make sure you’re not leaving money on the table when taxes are due. Take a look at these five tax tips that can help reduce the sticker shock of tax season.
1. Understand Your Tax Obligations
Small business owners are often surprised by the number of business taxes they have to pay. In addition to your own income, you’re also responsible for the following:
- Self-employment tax to cover Social Security and Medicare contributions
- Employment tax, or payroll tax
- Excise tax, which applies to certain industries like transportation
- Sales tax, which applies to businesses in certain states that sell goods and services
- Property tax on your commercial property
It’s important to understand what taxes you’re responsible for in your area and how much you may end up paying.
2. Pay Quarterly Taxes
To reduce the tax season sticker shock, it’s recommended that you pay quarterly taxes (usually due in January, April, June, and September). These payments are estimates of what you might owe and are paid directly to the IRS.
In fact, the IRS requires you to pay quarterly taxes if you think you will owe more than $1,000 in federal income taxes for that tax year after accounting for any withholdings or deductions.
3. Take Advantage of Private Office Space Deductions
Small business owners can deduct their office overhead to reduce tax liability. When you use a private office space like Office Evolution, this deduction is easy to calculate. Just multiply your monthly cost by the number of months you’ve used your space and subtract it from your top line. It’s faster and easier than keeping track of utility bills, furniture costs, and maintenance expenses, plus you may be able to claim the full amount vs. a percentage of expenses with a home office.
4. Track Your Deductible Expenses
Businesses will have a number of deductions to reduce their tax liability. It’s important to track and organize these expenses throughout the year. This can save you major time during tax season when these expenses are all together, plus it ensures you’re not missing opportunities to lower your taxable amount.
5. Hire a Professional CPA
Working with a tax professional can be invaluable to small business owners, whether it’s your first year in business or fifth. CPAs stay up-to-date on current tax laws and can help you navigate the ever-changing complexities of local, state, and federal tax law. Plus, they can also help you take advantage of deductions you might not have considered.
As an added bonus, you can document the expense of a CPA as a professional service fee and write it off on the next tax year!
Find the Office Evolution location nearest you and take the sting out of tax time!