Posted on: 21 December 2020
Americans deal with complicated tax laws. In fact, some recent estimates suggest that it might take as long as eight full weeks to read through the nation's current tax code. For small business owners who are working to stay profitable in today's pandemic environment, there is little time available to stay abreast of changing tax laws and the ways in which their small business venture might be impacted by them.
For most small business owners, the most suitable course of action is to develop a strategy of record-keeping that will improve their tax preparation experience. If you are a small business owner who is in need of a better tax preparation experience, here are three important tips.
Set up digital records for expenses and income
Keeping good records is the first step in meeting tax obligations on time each year. Instead of stashing receipts, invoices, and copies of checks in a box to be sorted later, small business owners should initiate a system that will allow them to quickly scan and file each record as it is received.
In addition to a main scanning system in the office, consider adding scan capabilities to mobile phones or work stations used by key employees. By inputting information as it arrives, it becomes easier to monitor financial health in real-time so that immediate changes or adjustments can be made if needed.
Budget for payroll and quarter tax bills
Payroll or quarterly tax bills that are not paid on time can incur penalties and become more difficult to pay. Instead, small businesses will want to budget so that money is available to pay these bills as soon as they come due.
While portions of the pandemic relief legislation allowed small business owners to defer some types of tax payments under specific criteria, doing so may only add to the financial burden of the next business year. Taking the proactive step to reduce spending in other areas or postpone expansion or growth can free up money and help keep small businesses from falling into the potential trap of deferring tax payments.
Work with a tax professional throughout the year
Another important tip for small business owners is to work with an accredited tax professional throughout the year. By meeting regularly with your tax professional, small business owners can gain insight into upcoming changes in tax law, get pointers on developing better record-keeping systems and learn about legal ways to reduce the tax liability of their business.
For more information about tax preparation, reach out to a local service.Share