Running your own business is an exhausting job. A business owner wears many hats: they manage sales, employees, inventory, and marketing… just to name a few. Every day is different, which is equally as stressful as it is exciting. While you have the freedom of making your own hours and being your own boss, it comes at the cost of having all the responsibilities fall on your shoulders.
You face a lot of problems as a small business owner, and one of the most difficult is definitely managing taxes. Filing taxes is stressful for everyone, but especially for small business owners. Just imagine having to do more taxes in addition to your personal ones. Yeah, sounds like a nightmare. As a small business owner, there are certain practices you can do to simplify the process and take a weight off your shoulders. You have enough worries as it is, don’t make filing your taxes more complicated than it has to be. Here are 4 tips to filing taxes for your small business:
Hire an Accountant
You may think you’re capable of filing your taxes all by yourself, but in the end, you’re always better off hiring an accountant. Being a small business owner leaves you easily susceptible to mistakes, and an accountant acts as a second form of security. Be sure to use an accounting service that offers software for tax preparers to ensure your finances are organized and kept track of. Using an accountant might cost extra, but it will always pay off when you can spend less time worrying about your taxes and more time focusing on your business.
Keep Records of Everything
You probably are constantly making purchases as a small business owner, and you want to keep track of everything. There are a lot of things that you may not realize you can deduct from your taxes, like car expenses, office expenses, phone bills, mileage, parking, and more. Keeping a detailed record of all these things will save you a lot of money when it comes to tax time. If you hire an accountant, they should help with keeping detailed records, but it’s never a bad idea to also keep track yourself by using a document scanner and uploading receipts and other files to the cloud. The more thorough you are with your records, the easier tax season is going to be.
Separate Business Expenses From Personal
When you run your own business, it can be hard to differentiate between what is a business expense and what is a personal one. But this is extremely important with filing small business taxes! Get a separate bank account, a separate business credit card, and be very strict with only putting businesses expenses on those accounts.
Classify Your Business
This is an important step when starting your own business, especially for tax purposes. There are a few major types of business structures:
- Limited Liability Partnership
- Sole Proprietor
- C Corporation
- S Corporation
- Limited Liability Company
- Single Member LLC
Each one impacts your taxes differently, so make sure you spend the time to correctly classify your business structure when you first start off to save you the headache later on.
There is a lot to keep track of when it comes to running your own business. With all your varying responsibilities, it’s easy to lose track of things and get overwhelmed. But your finances are something you want to always make sure you stay on top of. Any of these tips will make tax season as a small business owner a lot less daunting. Running a business is stressful enough, don’t let taxes get the best of you.