Tax Tips for Business Owners
If you are reading this, I first want to wish you good luck because you are reading this article means you are either running a business or at least thinking of starting a business. When it comes to new business, you may find yourself involved in a variety of different industries, from freight to plumbing or even the restaurant business. However, most entrepreneurs don't realize that they also entered into the tax "industry." Starting a business comes with infinite tax rules to understand and comply with. Because tax is so certain, I think the Bible has a typo: it should say that on the fourth day, God created the sun and taxes because just as certain as the sun will rise, taxes will be a thorn in the side of all business owners. The guide below is meant not to be all-encompassing but rather a rough guide of things to look out for.
1. Keep Good Records- I could say this a thousand times, and it still would not be enough. The foundation for good tax compliance is good record-keeping. Regardless of whom you hire, regardless of what line of business you are in, and regardless of how much money your business earns, please be sure to keep good records. At the bare minimum, your business will need records for tax filing for the end of the year for whichever tax form is appropriate to your business. To help facilitate this, you must keep track of every dollar that comes in and out of your business. This sounds daunting, and likely is daunting, but the cost of keeping poor records is much worse. Even when keeping the best records, it is possible for your business to be picked up for an IRS Audit. An IRS Audit is a review or examination of your business or individual accounts and financial information to make sure the amount reported on your taxes is correct. In the worst-case scenario, if you are audited for the expenses you claim during the year, you may be disallowed, in full or in part, a deduction of the expenses if you do not have proper records to support your expenses. If you have trouble handling the record-keeping on your own, it may be helpful to bring in a bookkeeper.
2. Find a Bookkeeper- As discussed above, trying to run a business and keep records will make your head spin. This is where a bookkeeper comes in. A bookkeeper's duties depend heavily on the needs of your business and can include, but are not limited to: (1)generating financial reports, such as balance sheets and income statements; (2)maintaining and monitoring financial records for accuracy (3)reconciling or reporting any discrepancies in financial reports; (4)producing or paying invoices for credit card bills or inventory orders, and (5) handling payroll. Outsourcing the above tasks as needed can facilitate easier tax compliance by having a professional handle administrative tasks while you focus on generating revenue for your business.
3. Find a Good Tax Professional- A good tax professional will be worth his/her weight in gold. Whether that person is a CPA or an attorney depends on what stage you are in the business. A CPA is great for handling normal business compliance tasks such as filing state and federal tax returns for the business. A lawyer may be useful and necessary if you have fallen out of compliance and are trying to mitigate the damages of past non-compliance. Further, in the case of a business audit, it may make sense to hire an attorney to defend your business from the audit.
If you want specific tax advice tailored to your unique situation, you are best reaching out to a trusted tax professional, like the attorneys at The Wilson Firm. Each and every business has its own set of complexities, so any business advice must be tailored to account for that.
