Every business owner is always on the hunt to reduce their business’s liabilities, continuously finding new ways to manage their business taxes. However, with the tax filing deadline approaching fast, these business owners must understand that learning to manage their taxes is crucial to operate a successful, profitable business.
That said, your tax management abilities will typically depend on your business’s legal structure, location, and whether or not it has employees. For instance, if you hire employees, you will have to pay worker’s compensation, unemployment insurance, and state or federal employment taxes.
In addition, you’ll also deal with income taxes and pay other state and federal taxes – but that depends on the nature and size of your business.
So, whether you’re a first-time business owner or you’ve been around the block for a few years now, you’ll be quickly overwhelmed knowing that you have to keep an eye on everything from your payroll to business expenses to profits to income to everything in between.
So, with that in mind, let us look at a few ways you can stay on top of your business taxes.
Hire a tax attorney or accountant
Taxation experts like tax accountants and attorneys do a lot more than keeping track of your business expenses or filing your business taxes. Instead, these individuals work round the clock, 365 days a year, to keep an eye on your business expenditures and income while providing you with advice to minimize your business’s tax liabilities.
In fact, we can say that your business won’t flourish without a tax accountant or attorney at the helm. So, hire one, preferably a tax accountant or attorney who has obtained an LLM taxation online degree, allowing you to remain on top of your taxes on both federal and state levels.
Separate your personal and business expenses
An easy way to avoid confusion while filing your taxes is to separate your business expenses from personal expenses. Doing so will enable you to prevent that all-so-stress-full IRS tax audit and other tax issues for the foreseeable future.
That said, if you somehow fall victim to the IRS audit and they discover discrepancies, they might start looking into your personal accounts from the lens of a microscope.
So, it is a good idea to keep personal and business expenses separate from each other. An easy way to do so is by opening up two bank accounts.
Furthermore, if you rely heavily on credit cards to pay for your business expenses, ensure it is linked to your business bank account, so filing your taxes at the end of the fiscal year will be less of a hassle.
Documenting everything from your business income to invoices and expenditures to everything in between is a surefire way to stay on top of your business taxes. However, if you fail to do so for any reason, you might not be able to leverage tax deductions, or you might end up getting audited by the authorities, particularly by the IRS.
That said, a wise decision would be to invest in accounting or record-keeping applications or software as it will allow you to track and manage all business expenditures with the click of a mouse. In the end, it is a low-cost investment considering the amount of money and time you’ll be able to save compared to recording and documenting everything manually through a pen and paper.
Choose the proper business structure
According to numerous tax experts worldwide, you might end up paying more on your business taxes if you fail to choose your business’s legal structure appropriately. Typically, four common business structure types exist; C-corporation, Partnership, Limited Liability Company(LLC), and Sole Proprietorship.
Every legal structure mentioned above has varying tax liabilities and requirements. Hence, it is crucial to contact your tax attorney or accountant to know more about them before choosing one for your business.
Moreover, you can also go online and learn more about these four business structure types. So, consider doing some research before you choose one.
Learn to manage your payroll appropriately
Payroll is a vital part of your business’s operations, especially if you want to stay on top of your employment taxes. So, if you’re looking to manage it properly and save some money in the process, consider outsourcing it to a third-party payroll management service provider.
And whatever happens, don’t try to cut corners by hiring a non-name payroll management company to save money. Who knows, they might not remit your payroll taxes and leave you paying even more in a situation where you could have saved some money.
Filling your taxes accurately and paying them on time is something every company should do to prevent fines, penalties, and an audit. Although numerous tax management strategies will help you out, all of them won’t apply to your company.
So, it will be worthwhile to hire a competent tax attorney or accountant to help you with your taxes as they know every taxation law and policy that your business needs to abide by and follow.