Published on 21/06/2021
The last couple of years have seen small businesses pacing up to rampant growth. Be it due to the power of social media or inherent improvement in the Business environment, small businesses have created a new ecosystem. However, handling the backend of a small business can be grueling. With not a lot of human resources to spare and a dearth of time, small businesses may struggle with filing business-related taxes that many see as an extra set of work in addition to running the business itself. The entire process of filing such taxes can be overwhelming and time-consuming- especially for new business owners and entrepreneurs.
Unlike big business houses, there are no tax professionals on the payrolls of small businesses to help them out with federal, state, and local taxation norms. Some aren’t even aware of the types of taxes to file. Here are some quick tips for small business owners to plan their taxes right from the start of the tax season.
Finding the right Accountant
Hiring an accountant is one of the smartest things small business owners can do to ensure on-time and correct tax filing. Hiring one will help you reduce the time you will personally spend on calculating and filing taxes- processes that are prone to countless mistakes.
Hiring an accountant can seem like an expense initially but it really is an investment. He/she can also help you in asset depreciation assessment and even estimated tax payments. Just like other members of your team, accountants are also an indispensable part of your day-to-day operations.
Small business owners must be aware enough to opt for an accountant who specializes in small business tax filing. An accountant’s previous experience in tax filing for a small business can be an added advantage.
Reach out to qualified tax professionals at [email protected] for all your tax needs.
Determining tax liability
Once you have hired an accountant, the first topic he/she will touch upon is that of your small business’ Tax Liability. The process will lead to how your taxes are filed and paid. Remember, your tax liability as a certain business will differ from other businesses.
Your tax liability will primarily be determined by
- Business structure
- Assets, and
- Number of employees.
The structure of a business will determine the type of federal tax you will have to pay. In all likelihood, you will have to file different types of taxes.
The type of assets owned by the small business owner will also impact the business’ tax liability. If you are a small business with employees, you will be required to pay employment-related taxes as well. Similarly, be prepared to pay self-employment tax if you are a self-employed business owner.
Avoid common mistakes
Despite hiring an accountant, small business owners frequently make basic mistakes that can be easily avoided. For instance, do not forget to pay your quarterly estimated tax. You will need to pay this 4 times a year so make sure that you mark your calendar with the same. Keep your books clean; have clear and accurate business records- this will make filing taxes a walk in the park. However, prepare yourself to brace for the unexpected. Always set aside a separate fund for your tax purposes and do not treat it like your rainy day fund. Make sure that any unexpected expenses are paid out of the rainy day fund and not the tax fund.
There are a handful of checks you can put in place to make sure that your small business does not falter with taxes. You can connect with tax professionals at My Tax Filer for further guidance.