As tax season draws near, small and mid-sized businesses have to focus on planning carefully and paying attention to the details. Whether you’re an experienced business owner or just starting, there are key factors to keep in mind to get through this time smoothly, stay compliant, and make the most of your finances. Here’s how you can get prepared.
First, change how you think about “tax season”—it shouldn’t be a last-minute scramble. Staying organized all year helps set your business up for success. That’s why some firms, like mine, offer subscription tax services to keep you engaged with tax-related matters year-round. It’s important to keep detailed records of your finances, understand your tax responsibilities, and figure out what deductions you can take—not just once a year.
Preparing proactively at the start of the year helps avoid trouble with the IRS. You’ll need to budget for taxes, since unlike employees who get taxes taken out of their paychecks, businesses have to save a portion of their income each month to handle taxes. By setting aside funds early, keeping track of important deadlines, and setting deadline reminders, you can avoid unnecessary fines or penalties.
Small business tax deductions can significantly cut down what you owe. These include expenses like home office costs, professional fees, rent, office supplies, utilities, and travel. Keeping precise records is especially important for mixed-use expenses like business meals or car expenses.
Businesses should also remember specific deductions like those under Section 179 for equipment, which let you write off costs immediately. Other crucial deductions involve things like employee pay, contractor costs, advertising, and education, which can decrease your taxable income and support your growth.
Leveraging technology is another critical step. Although accounting basics haven’t changed much in decades, modern tech brings new ways to simplify accounting, especially for small businesses. Tools like QuickBooks for bookkeeping, Expensify and Stripe for financial management, Salesforce and Slack for operations, and NetSuite for resource planning can help entrepreneurs understand and grow their financial activities more effectively.
Don’t hesitate to outsource when needed. Most business owners aren’t accounting experts, so hiring a skilled CPA is vital. They help with tax preparation and money management to keep your business financially healthy. Look for a CPA familiar with tax laws and experienced with your business type to improve financial planning. They should use technology to make processes more efficient and should help manage your sales tax compliance.
If your CPA isn’t meeting your needs, consider switching firms after tax season when there’s usually more time for new clients. Starting this transition at a less busy time can make it smoother. High-quality support is within reach, even for small businesses. With the right technology and expert advice, navigating complex tax issues becomes easier, and you can spot more cost-saving opportunities.
Following these tips and getting ready for taxes beforehand will benefit both you and the future of your business.
