Cruise Through Tax Season With These Year-Round Habits
Staples believes some of the best advice on running a small business comes from business owners just like you. In this series, we feature different small business owners who have excelled in a particular area of running a company. Here we highlight Darrin Mish, a Florida-based IRS attorney who has helped small business owners conquer tax time.
While accounting is a necessary part of any small business, it’s not usually the simplest or most exciting task. However, good habits throughout the year will make filing your small business taxes less painful, Mish says. Below, he offers seven things you can do throughout the year to make preparing your taxes for Uncle Sam a breeze.
1. Mark These Four Important Dates on Your Calendar
Depending on the circumstances of your business, you may be required to pay quarterly taxes. Make sure you understand the rules of quarterly taxes so that you can avoid potential interest or penalties. Typically, the payment schedule for quarterly taxes works as follows:
|
For Income Received |
Estimated Tax Due Date |
|
Jan. 1 to March 31 |
April 15 |
|
April 1 to May 31 |
June 15 |
|
June 1 through Aug. 31 |
Sept. 15 |
|
Sept. 1 through Dec. 31 |
Jan. 15 |
2. Keep Business Separate
If you haven’t already, set up separate bank accounts for your business and personal finances. This will save you from having to go through your accounts and start separating your transactions, which can amount to an accounting headache or accounting fees once tax time comes around.
3. Regulate Your Receipt Keeping
Maintain good accounting records so that you will be able to take advantage of all possible deductions. As you spend money on business expenses keep the receipts in a physical or digital folder and organized by category, such as repairs and maintenance, office supplies, legal fees, etc. Deductions must be substantiated on your tax return, and the records must be provided to the IRS in case of an audit.
4. Every Mile Counts — Keep Track of Vehicle Deductions
If you use your vehicle for business, maintain a log of the miles that you drive by keeping a notebook in your car or using an app like MileIQ. Note the date, purpose and mileage at the beginning and end of each trip. Also, remember to get and keep receipts for any tolls you pay.
5. Do Some Good and Donate
If your business has a lot of unsold inventory or inventory that becomes obsolete quickly, don’t store it — donate it to charity. This is not only less wasteful, but you’ll also be able to write it off as long as you keep your receipt for the donation.
6. Say Yes to Education
Your business can deduct educational expenses that maintain or improve your employees’ skills. Consider signing your employees up for seminars, conventions or continuing professional education based on their interests and positions within your company. Make sure to keep detailed notes and receipts for any training you pay for.
7. Build Your Go-To A-Team
Free up your time to focus on other areas of your business by hiring professionals to handle your payroll, bookkeeping and tax returns. Payroll services will distribute paychecks to your employees, withhold payroll taxes and provide you with copies of the payroll tax returns. If it’s bookkeeping and tax returns you’d like assistance with, consider hiring an accounting firm, enrolled agent, or a law firm with a tax practice.