No one wants to do their taxes, but with a few tips, you might just be able to make your tax season easy.
Running your own business can make filing your taxes complicated, so the sooner you start organizing your finances, the better. The 2018 tax year is coming to a close, which means it’s the perfect time for small business owners to start planning for next year’s taxes.
Here are some tips to help you stay ahead of the game and save some money:
1. Tax software is helpful—use it!
There are many good reasons for small business owners to use tax software. For one, it keeps track of deductions that may otherwise be missed. In addition, your filings are automatically backed up. Most importantly, your filings are accurate – according to the IRS, less than 1% of online tax returns have errors, compared to 21% of paper returns.
2. Stay on top of tracking deductible expenses.
It’s easy for expense receipts to get lost and expense tracking to get neglected. Download expense tracking software, or better yet, a mobile app that lets you take photos of your receipts. Some apps even let you roll in expenses from your credit card and online banking accounts so that your expenses are all in one place. At year end, you’ll be able to easily produce a report rather than have your CPA waste their precious time sifting through a shoe box of receipts.
3. Pay your retirement accounts now.
As a self-employed worker, your taxable income can be reduced by putting income into a retirement plan. This income won’t be taxed until you retire, so you’ll double your benefits by having a tax break now and creating a secure retirement for later. As a small business owner, you can contribute up to $5500 to a traditional or Roth IRA if you’re under 50; $6500 if you’re over 50.
4. Make sure to deduct your home office and business equipment.
If you work from home, you may be able to deduct insurance, mortgage interest payments, repairs and utilities. Both renters and homeowners are eligible. After determining what portion of your home is dedicated to running your business, your tax software calculates which percentage of these you can deduct.
5. Keep an eye out for carryovers.
Some deductions may not be fully used in one year and can be carried over into future years. These can include capital losses, net operating losses, home office deductions and charitable deductions. Don’t forget to track these from one year to the next.
This article is intended to provide generalized tax information. It does not give personalized tax advice.