First-Time Business Owner Tax Advice

Starting a new business is an exciting time. You’ve stepped up, taken a risk, and are pursuing a dream. Yet, there are many things that will try to put that dream to an end. From business mistakes that aren’t at all related to your skills in your trade to dramatic market changes, many events can shut your business down before it really even has a chance to be successful.

One of the biggest areas in which new business owners tend to find themselves frustrated is with taxes. You need to have a handle on what opening a business is going to do to your tax situation and create a plan to make the most of it.

Here are some tax tips for starting a new business:

Take time to deal with taxes. You’ll want to set aside a little bit of time each and every month to pay attention to taxes. If your business has employees, a good time to do this is when you process your payroll. When you’re handling your employees’ withholding taxes, it’s naturally a convenient time to deal with your own tax records, as well. You can also take advantage of that opportunity to either make your estimated tax payments, or to set aside the money for those payments until they are due.

Track your expenses as they happen. Anytime your business incurs a deductible expense, track it. This is especially important for mileage, as well as for expenses that you pay cash for. If you don’t record these immediately, they are likely to be forgotten. Get into the habit of getting a receipt for any expense, no matter how small, and even if it’s one that you aren’t required to have a receipt for.

Be diligent about keeping records. Your tax records should be a priority for your business. You might want to organize your tax records into local, state, and federal sections, if applicable. The better organized your tax records are, the easier time of it your tax professional will have during tax season – and the less you’ll wind up paying in taxes, too.

Ask lots of questions when starting a new business. If you’re confused about a particular aspect of your business taxes, ask questions. You can do your own research online or via publications, but you can also talk with your tax professional if there are questions that you can’t seem to find a ready answer for.

Make good use of accounting software. If you have employees, an accounting software package that also has a payroll function will be a great boon to your business. In many cases, an accounting package will alert you when there are changes to tax laws, help you calculate your withholding, and provide you with financial reports that not only help at tax time, but will help you keep your finger on the pulse of your business.

Make a tax calendar. A tax calendar is a tremendous tool for the business owner. It will tell you when taxes have to be filed and which ones. Depending on where you live, you might have a dozen or more filing requirements each year from federal, state, and local levels. Some will be quarterly, some will be annually. A tax calendar lets you know when your tax obligations are due, and will greatly assist you with your financial planning.

Consider getting some help and advice. Even a simple service-based sole proprietorship can benefit from a little bit of tax advice. In addition to the Internet or other research sources, consider talking to a tax professional. Tax professionals work with businesses like yours every day and can give you some solid advice and perspective on what you need to be doing to get into the best tax situation possible. This can be especially important if you’re starting a new business.

Learn about deductions. There are all sorts of deductions available to the business owner. From the business use of vehicles to the home office deduction, there are lots of ways your business can save on taxes. The key thing here is to understand how the rules work for these deductions, follow them carefully, and then make sure you’re documenting them accurately.

The prospect of starting a new business can seem daunting at first. The good news is that, with a little bit of good advice and a little bit of work, you can design a tax strategy that works well for your business.

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