5 Business Tax Tips to Make Filing Easier This Year
1. Keep Personal Expenses Separate From Business
As tempting as it may be, mixing personal and business is a huge no-no for finances. Get separate checking accounts and credit cards for business expenses. Also, make sure you have a separate stash of cash set aside specifically for business so that you don’t dip into your own pockets for cash-only expenses.
Here’s another tip: Look for business credit cards with points systems that benefit your line of work. For example, if you travel frequently for client meetings, find a credit card that provides mileage incentives and discounts on checked bags, airfare, and rental cars.
2. Understand Your Tax Obligations
There’s no point in worrying about taxes if you don’t even know what you owe. Tax requirements are generally based on your business type. For instance, sole proprietors use their personal tax forms to file, while corporations file with a different set of business forms. Look up your tax obligations and which forms you need to complete each year. Also, check your tax due dates and determine whether you’re required to make quarterly taxes.
3. Organize Your Accounting System
Before tax season commences, it’s important to have all your ducks in a row. There are always hiccups and perplexing numbers that require deeper investigation, but the more you can do throughout the year, the fewer headaches you’ll have come April 15.
Make sure you have efficient accounts receivable and accounts payable systems in place. Consider using as much electronic automation software as possible to collect and organize data effectively. Automation also helps send and receive payments so that all bills are paid and collected on time. Sync your systems and set aside time to review and reconcile accounts on a regular basis. You don’t want to wait until the end of the year to find out that you’re missing thousands of dollars. You can learn more effective accounting strategies online and by taking advanced courses.
4. Categorize Your Expenses According to Tax Deductions
As expenses incur, label them according to tax deduction category. For example, categorize airfare, parking fees, and fuel expenses under “travel,” and categorize webinars, books, and conference registration fees under “education.” When it comes time to separate your expenses into deduction categories, you’ll be one step ahead of the game.
5. Be Careful With Your Giving
Generosity is wonderful, but you can’t always rely on giving for tax deductions. The federal government has clear restrictions on the types of gifts that are excluded. Such exclusions include:
• Gifts for medical fees or tuition expenses• Gifts for political groups• Gifts that are given to spouses• Gifts less than the annual exclusion amount
Refer to the IRS website for the current annual exclusion threshold and other tax updates. Also, check out the infographic that Northeastern University put together to help explain the details of gift tax.
Stay Organized and Pay on Time
Make life easier on yourself by staying organized all year round. Talk to a tax professional for extra guidance, and always make sure you pay your taxes on time.
Still hungry? Learn More at Northeastern University School of Business.