Tax time. That [insert your feeling about taxes here] time when we all pay our dues back to the government we operate under. As an employee, it’s easy to find joy in tax time, as you are likely to see a return, even with poorly played out papers. As a business owner, things start to look a little bit different. As you start to grow and add team members, your tax bill only becomes larger.
For the growing business, you start to see larger chunks taken as penalties for what seems like normal business progress. Things like working from home, adding employees in-house or outsourced, and operating only online can all add up to more money out of your pocket if you aren’t careful.
To help you combat the pain of each tax season, we put together 4 habits you can start now to ease the pain of tax time as a business owner. Even as an employee, these habits will help you get a bigger return, and who doesn’t love that.
1 – Save Some
Saving is key, and if you’re already doing it, great, but are you saving enough? Generally, the rule of thumb is to save at least 20% of every last bit of pay you receive. It’s basically a rule of budgeting.
They say save room for 20% unallocated budgets on home improvements in case of disasters during renovations. 20% utilization score on your credit cards will help you bolster and raise your credit if you pay it off quickly. It’s even standard to fill up your gas at 20% because the rest is a reserve, and that’s when many gas lights activate.
Saving more than 20% is even better, but 20% of all payment will get your ready for shelling out what you owe at the end of the year.
2 – File Quarterly
Did you know you can file your business taxes quarterly?
As a matter of fact, paying your tax bill quarterly is a great way to ease the cost of business for your company. It might even stack up enough over time to where you sneak in a little return for the business. That means a bit of extra spending money on upgrading your business.
Filing quarterly makes it so you pay off of the yearly projections you make with your accountant. As you start to file each quarter, you ultimately start to lop the top off of your yearly tax bill. If you are worried about paying the bill for your growth, this is a great way to attack that possibility head on, as you can adapt your payments each quarter with the growth of your business. As tax season starts to roll around, you won’t have to worry about shelling out thousands to the IRS, or risk having to close your doors because you can’t pay to play.
3 – Separate Your Receipts
Separating your receipts is a great way to get yourself organized. Depending on your customer base each month, separating them can get kind of tricky. Depending on how you like your items organized, you could separate them by month, week, or day. If you are working more on a per project basis, you might want to look into separating them by project.
No matter how you decide to separate them, you need to start a system that keeps your physical copies all in one spot. Get a filing cabinet or a travel filing case to keep your receipts in order. A travel filing case per year really simplifies your books, and makes it easy to label by year to avoid any confusion.
4 – Meet With Your Accountant
You accountant could be a constant contact point for your business, so if you are looking to reduce your tax bill next year, set up a meeting. As long as you stay organized with a proper filing system, an extra meeting or two throughout the year will help you keep your books straight. You can go through your monthly receipts you organized, and see exactly where you sit with deductions and compare it to the potential bill.
If you can’t find any time to meet with your accountant, make sure you are going through your receipts, and keeping a general log of your deductions. Even if they aren’t perfect, your books give your accountant a starting place, and that’s always helpful.
Take Control of Your Finances
You can be proactive about reducing your tax bill each year, and it can all be done with these 4 simple methods. Take control of your finances, and your bank account and business will continue to prosper.
If you are lost, Excellent Admin is always here to help. Our top clients get monthly meetings with our tax professionals, so they don’t have to worry about the scary number inside of that IRS envelope because they already know what it says.
How do you ease your tax prep pains each year? Tell us your tax prep habits below.