Preparing your small business for the tax season should be an all-year endeavor if you want to avoid last minute hassles. However, most small businesses don't maintain complete accounting records. And most business owners choose to do the books themselves rather than hire an accountant. While this can be a cost-saving option, it can easily get you in trouble with the tax authorities if you don't update your business financial records. Here are some of the top ways in which you can prepare your business for the tax season and get the most out of your returns.
Keep track of your deductions
Your business can benefit from various tax deductions and allowances. Maintaining clear records of your deductions can help you make savings come the tax season. Some of the most common deductions include the following:
- Capital assets such as business furniture, equipment, and computers
- Business appliances
- Courses and seminars attended to sharpen your business acumen
- Unused items of inventory that were donated to charity
These amounts are allowable against taxable income, and small businesses are allowed to deduct these expenditures before calculating their taxable income. Knowing which deductions and allowances apply to your business can save you a lot of taxes.
Separate your expenses
Many small business owners combine their business and personal expense without knowing the implication of such actions to their tax returns. If you claim any expenditures such as rent, rates, utilities, and insurance, you should have clear records and receipts as evidence that you have separated your business expenses from your personal expenses. Also, if you use personal assets for business use, for example your personal vehicle, home, computer, or mobile phone, you should keep records that indicate the use of personal assets for professional purposes.
Maintain complete records
Incomplete records can be a headache for most small businesses, especially where there are no receipts to act as physical evidence. If your books don't balance by the time you are required to pay taxes, you may end up getting over- or under-taxed, both of which can be a disadvantage to your business. Recording all your expenses and incomes once they are received or accrued can save you from dealing with incomplete books during the tax season.
The tax season can be a stressful time for many small business owners. If you don't have an accountant, you should consider hiring one, either permanently or temporarily to keep your books in order and ensure that your business survives the tax season with no hiccups.Share