If you’re worried about filing your small businesses’ tax returns this year, you’re not alone. Only 25% of small business owners feel confident that their taxes are filed correctly. Whether you do your own taxes or meet each year with a tax professional, these six steps will help you be as prepared as possible.
Collect documents throughout the year. Documents associated with loans, your vehicle (if you use your vehicle for business), and various assets should be collected throughout the year and filed in a dedicated folder.
Keep your accounting books up to date (on monthly or weekly basis). Whether you do bookkeeping manually or use a software platform, it’s crucial that your accounting records are up to date so you can prepare accurate financial statements.
Save a percentage of revenue throughout the year. Being self-employed is difficult because we do not have anyone deducting from our paycheck to pay our taxes. We’re responsible, and we’re held accountable if the money isn’t there. The Profit First method recommends opening a savings account specifically for taxes and transferring 15% of your top-line revenue to this account twice a month.
Have a folder or envelope ready at the beginning of the year for all your personal tax documents. This will keep your personal tax documents clearly organized and separated from your small business documents.
Let your tax professional know of any big personal life changes that happened throughout the year. Major life events such as getting married, having a child, buying a home, getting a promotion/raise, and getting divorced can affect your taxes. Make sure your tax professional is aware.
If any big changes are happening, do a mid-year tax planning session to avoid any surprises. For example, if your business is outpacing itself or making less compared to revenue projections you’ll want to meet with your tax professional mid-year to discuss a game plan.
SMG knows small business taxes inside and out. Let us help you file confidently this year and move your business to the next level financially.