It’s just the start of the month. You’re making a lot of profits, and everything is going according to plan. Your employees are happy, you’re able to pay your bills, and no overhead costs are looming on top of your head.
However, in a blink of an eye, you find yourself at the end of the month, waiting to file your taxes. You seemed to have forgotten to deal with your taxes during all your celebrations and have let everything pile up in the last two weeks.
Teachers have constantly repeated: “don’t procrastinate and leave your lessons to the last day.”
And this advice doesn’t have to end in high school, and it should stay in your mind in your work practices.
So taking care of your taxes as early as possible should be one of your priorities.
But how exactly can you do that?
Follow these steps to get you started!
Get the Right Accountant
Sure, in the past, you might’ve needed a person who was just good with numbers and who worked with spreadsheets.
But now, businesses looking to expand faster are seeking accountants who are well-versed in technology, i.e., utilizing accounting software.
There’s also a unique feature in accounting software to store your data in the network safely. It’s called cloud-based bookkeeping.
Hence, hiring an accountant who knows where to store and retrieve your financial data and monitor your income and expenses over the months is crucial for better management of your taxes.
Report Correct Income to Internal Revenue Service (IRS)
The IRS is a governmental body that’s responsible for collecting taxes.
And you certainly don’t want to end up on their wrong side.
The forms called the 1099-MISC that you receive to input your income are the same that the IRS gets their hands on. So ensure that you fill out the correct amount of income that flows into your business.
The income you report to the IRS should match the income stated on the 1099-MISC forms. Even if a client doesn’t send out a 1099 form, that income must be mentioned and reported.
Separate Business from Personal
Even if you’ve reported your business expenses to the IRS, the presence of personal expenses mixed with business expenses can put you in a tough spot with them.
Hence, it’s always best to keep your business expenses separate from your personal expenses.
If you already have a personal account and credit card, open a business one and get a company credit card. Since doing so will not cause any confusion in the future when filing your taxes.
Classify Your Business
Is your business a corporation?
If it is a corporation, then what type of corporation is it?
C or S?
If you own a C corporation for instance then you have to pay taxes twice: on the company income and the income you receive as an owner.
While if you’re an S corporation, you don’t pay taxes. You just provide the company’s revenue as proof of personal income.
Also, corporations are not the only kinds of business classifications that exist. You can classify your company by any of the following: limited liability partnership, sole proprietorship, and single-member LLC.
When you fail to specify what kind of business you’re running, this could lead to overpaying your taxes.
Hence, if you’re not familiar with the above terms, you better consult either an attorney or accountant and let them explain to you the differences between them thoroughly.
