As a small business owner, you know that taxes are a complex and ever-changing landscape.
Because as the economy changes, so does each new tax year bringing with it a slew of updates and new tax laws which can keep you scrambling to keep up.
So it’s important to plan as far ahead as you can and make sure that you’re taking advantage of all the deductions and credits you’re eligible for.
This guide will help walk you through everything you need to know about planning for the new tax year.
What Are Some Things You Can Do?
There are several things you can do now to ensure that you’re taking advantage of all the deductions and credits available to you in order to minimize your tax liability and maximize your chances of a successful tax season.
Know the basics of the new tax law. There have been some major changes this year, so it’s important to be up-to-speed on what those changes are. The most significant change is the new corporate tax rate, which has been lowered from 35% to 21%. This will have a major impact on small businesses that are structured as corporations.
Stay organized. One of the best things you can do for yourself come tax time is to stay organized throughout the year. This means keeping track of all your income and expenses, and keeping good records of both. You can use accounting software like QuickBooks or FreshBooks to help with this, or you can simply use a spreadsheet.
Review your withholding status. If you haven’t already, now is the time to review your withholding status with your accountant or tax advisor. With the new tax law in place, your withholding status may have changed and you may need to adjust your withholdings accordingly. This is especially important as you may need to increase your estimated tax payments for the coming year.
Know the deadlines. One of the most important things you can do to ensure a successful tax season is to know the deadlines. Taxes are due on April 15th, as a small business owner you may be required to file quarterly estimated taxes. Make sure you’re aware of all the deadlines that apply to your situation so that you don’t end up owing penalties and interest.
Review your expenses. Take some time to review your business expenses from the previous year. This will help you get an idea of what deductions you may be able to take when you file your taxes. Are there any areas where you can cut back? Are there any necessary expenses that you’re currently using but not deducting? Identifying opportunities to save money now can help reduce your tax liability later on.
Make sure you talk to your accountant or tax advisor early. Don’t wait until the last minute to meet with your accountant or tax advisor—the sooner you meet with them, the better prepared they’ll be come tax time. Set up a meeting early in the year so they can help you plan and prepare for the coming months ahead.
By following these tips, you can ensure that your small business will be in good shape come April 15th.
Still don’t know where to start or need some help? Reach out today! Our team is here to help!
It’s interesting that most businesses manage their cash flow this way… If there’s something that needs to be paid and the money is in the account, they take out the “checkbook”.
But what happens when you need to invest in equipment or when a financial decision needs to be made? Are you still just looking at your bank account balance?
What’s the alternative?
Forecasting! It’s an incredibly important tool/practice when it comes to maintaining financial health within a business.
When you have a forecast of possible slow months or upcoming expenses outside of the recurring ones, you are able to make more educated decisions when these circumstances come up.
When deciding to take a trip somewhere, we often look at the weather forecast so that we can take proper attire and be prepared for fluctuations in climate. This is a very similar situation.
Let’s take a look at an example…
You have $10k in the account and need to make a $5k purchase. You’re ready to swipe your card… If you had up-to-date projections, you’d realize that next month is a slow month, and the $10k that you had in the account is to support that. Instead, you swiped the card and realized later on that you could have held on a little longer to make that purchase, and instead you now have to pay interest to borrow money to cover that gap in cash flow.
It happens! We’re human and let’s be honest, business owners wear WAY TOO MANY HATS sometimes!
Managing Money in Your Business
There will be seasons when you do better than others and the forecast will never be spot on, but it WILL help you make more educated decisions.
When you’re ready to purchase something or make a financial decision within your business, take a look at your projections to see what the coming months are bound to look like. If your sales are good this month but the next three months you expect to take a hit, you don’t want to use the funds you’ll inevitably need.
Reviewing your forecast will become a habit, and you’ll start to realize how impactful it really is.
This may all sound overwhelming. The good news is this is something that we take care of for our clients because we know how important it is in situations like this.
Ready to learn more? Send us an email at [email protected] or give us a call at 818-436-2775.