Figuring out your tax strategy after you've already spent the money and booked the revenue may work fine, but if you head further upstream and structure your financial management processes you can make tax prep easier, maximize your deductions, and minimize your tax liability.
Figuring out your tax strategy after you've already spent the money and booked the revenue may work fine, but if you head further upstream and structure your financial management processes you can make tax prep easier, maximize your deductions, and minimize your tax liability.The mid-April tax deadline has a way of focusing attention on tax preparation, but savvy business owners know that taxes demand year-round attention. With taxes top-of-mind, right now is a perfect time to review how you handle your business taxes and make some improvements. Start with these suggestions from American Express Open
Retool Your System During Tax Season -- One of the best times to change the way you track expenses is when you are gathering information for filing. At that point, you are most familiar with any shortcomings in your system, whether it is a receipt-filled shoebox or a tax software package. Pay particular attention to the documents your accountant says are missing from your current return; create a system to store and retrieve these materials easily. Another reason to create a good expense tracking system is to be better prepared in the case of a lawsuit or audit; having ready access to organized back up material can save you time and reduce the stress that may be involved in retracing your steps.
Manage Cash With Taxes In Mind -- Even successful companies may owe money at federal tax time. While it may not be as exciting to budget for taxes as it is for marketing programs or hiring, savvy business owners know that it is essential. To help facilitate paying quarterly tax installments throughout the year, you should plan your cash flow around this bill. Savvy small business owners recommend setting aside a certain amount of money each month, based on your previous year's tax liabilities. Budget for owing taxes even if your company is not profitable - your taxes are based on income minus IRS-approved deductions, not your revenues minus all your expenses.
Separate Personal And Business Expenses -- To simplify record-keeping and tax filing, keep your personal and business expenses separate. Having a charge card for just your business expenses can help ensure easy record-keeping through year end statements and can serve to keep you on a budget by paying off all charges on a monthly basis.