For many small business owners, managing taxes can be an ongoing and daunting challenge requiring a good organizational system and a lot of company resources. Even the most organized entrepreneurs may face a difficult time as they discover just how much a business’s taxes entail, according the the U.S. Chamber of Commerce. To equip small business owners, they published a list of 3 things you can do to “handle the 2023 tax season with ease.”
Create a Bookkeeping System to Stay on Top of Your Income and Tax Viability
Having a strategic plan for your record-keeping is a good practice, but one that needs to be viewed as a regular process instead of a pre-tax prep process, which can be a big change for some companies.
“With good bookkeeping comes good record-keeping, which requires putting a strategic system in place where you can keep track of all your business’s transactions and receipts,” according to the U.S. Chamber of Commerce.
Don’t Wait for Tax Season to Begin Making Tax Payments
Businesses may put off making payments on taxes, but that can ultimately lead to penalties and interest on underpayments. Joy Shaw, Director of Tax for Intuit, recommends a three part process to make this easier.
“[First], simplify your records. If you have multiple accounts, consolidate,” Shaw said. “[Next], automate payments [and] receipts that will simplify your recording. [Finally, use] integrated systems so that payment, bill paying, invoicing, booking transactions, payroll, sales, [and] tax benefits can all be integrated to combine into reports that can then help during tax time.”
Small Business Owners Should Look Out for New Tax Code Developments
While all three of these tips are really important, this last one is incredibly relevant during tax season. Tax law changes constantly. Having a great professional by your side is one step to making sure you are prepared and to ensure you take full advantage of any tax credits and write-offs. Even the timing of purchases can have a big impact on the ability to deductions.
“What’s most often overlooked is the timing of your expenditures,” Shaw said. “It depends on when you put your purchases in place, how much you can write off from those more capitalized assets. If you are purchasing most of your things in the last quarter of the year, for example, you’re very limited on what you can take as a deduction.”
Al-Nesha Jones, founder of ASE Group, brought up a really good point about deductions.
“The government offer[s] a credit for adopting a new 401(k) plan, and/or offering automatic enrollment,” Jones explained. “If this is something you’re doing to retain employees [or] attract quality talent, there’s also a tax credit out there for you. This credit could be up to $5,500 a year, and you can claim it for up to three years.”
There are other deductions that small business might not know about, such as mileage deduction, credits for research activities, employee healthcare, clean commercial vehicles and energy credits. All of these are also dependent on timing, so make sure you are working with a trusted tax professional.