Nerdwallet reports that there are 33.2 million small businesses in the United States. Further, 34.6% of small businesses have been in business for at least ten years. Unfortunately, 20% of new businesses won’t make it past one year.
One significant reason a small business may not survive is because of poor financial management. It would be best if you were organized, including intelligent small business tax planning to succeed.
Never find yourself caught unaware or incurring tax penalties. Here are the do’s and don’ts of tax planning.
Do Ensure Record-Keeping Year-Round
This will make a tremendous difference for small businesses during tax time. It will also help you be more efficient and spend less time preparing to file. You need an intelligent business accounting system to help you keep track.
Every time you make a transaction, you will need to enter it into the system. Here, you will separate your business purchases from your personal.
Don’t Neglect Financial Record Maintenance
You want to keep your records organized all year round, but your entries must also be accurate. This will give you the correct financial reporting for the year that you need for tax planning. Business accounting records should also have a backup available to prevent data loss.
Tax plans rely on the fact that you have regular access to the general ledger, the balance sheet, and the P&L.
Do Maximize Tax Deductions
Your small business can reduce tax liability by reviewing business finances regularly. This includes looking at inventories, debtors, and fixed assets. Some items you can write off have:
- Assets that do not generate revenue
- Debts you cannot recover
- Obsolete stock
You may be surprised as to how much you can write off. The vital detail is that it has a legitimate business purpose. Business travel, commercial rent, and equipment can be written off.
Dont Ignore Due Dates
Operating a small business may stretch you thin. You could be wearing so many hats that you forget about tax obligations. To avoid penalties, you must adhere to IRS due dates.
Do Invest in Bookkeeping Software
Everything you need to stay on top of tax plans you can do with the correct application. Using business accounting software simplifies bookkeeping and makes you more efficient.
Further, it may be a good idea to set up some time and train yourself on today’s best software solutions. The more you know, the better you can plan your business finances.
Don’t Overdraw
This should never happen without adequate planning. When you take money out of a business account, know what bucket the amount you are removing belongs to. It would help if you marked withdrawals like salary and wages, operating costs, marketing costs, etc.
Small Business Tax Planning Tips
Now that you know what you should and should not do with small business tax planning, it’s time to get cracking! The Pacific Tax & Financial Group can help. They have the experience and expertise to create the right strategy and tackle any of your financial concerns.
Their tax professionals will prepare your tax return quickly and accurately. Get maximum results. Get in touch with the Pacific Tax & Financial Group today to learn more about business tax plans.