Where to start to get ahead of this tax season
Tax season can bring stress for most people, but it can be especially difficult for new business owners. Struggling with the ins and outs of taxes several days before they’re due is a common mistake. Rather than finding yourself in that familiar and frustrating situation, rely on the following tips to make the next tax season easier.
Stay Up to Date on Changes
Early in 2018, the Tax Cuts and Jobs Act took effect, bringing with it many changes for business owners. This tax reform brought about changes such as:
- A reduction in the top corporate tax rate
- A reduction in individual ordinary income tax rates
- Elimination of itemized deductions
- Increase in standard deduction
If these sound like big changes to you, you’re not alone. It’s time to put in some research, if you haven’t already. You’ll want to be prepared for potential impacts on your finances.
Of course, this isn’t the first time the tax code has changed, and it won’t be the last. If you stay up to date on any potential changes to the way the U.S. handles its taxes, you’ll never be caught off guard.
Prep for Estimated Taxes
If you underpay on your quarterly taxes as the year progresses, you might end up taking a financial hit in the future. Taking the time to tend to your estimated tax payments might seem like a chore, but it’ll help your business avoid penalties and maybe even plan out your finances more effectively. If necessary, consider hiring an accountant to help make sure this process is handled with care.
Reassess Your Business Structure
Now is a good time to weigh the pros, cons, and suitability of your current business designation. For example, if you’re a sole proprietorship, there’s legally no difference between you and the business you run. Restructuring to become a limited liability company or partnership can change your legal liabilities and the way your finances work. Other possibilities include making the leap to an S corporation or C corporation.
Rather than trying to make a change in business structure on a whim, consult with a small business accountant in Denver. Having an expert opinion will help you avoid legal pitfalls. And in some cases, you might discover that making a change isn’t worth the trouble as far as taxes are concerned.
Keep Track of Deductibles
Start keeping track of your deductibles as soon as you can. This means collecting receipts and other evidence of business expenses throughout the year. Consider things like the cost of business insurance, vehicles, utilities, and home office costs. You’ll also want to keep track of charitable contributions your business makes. Those small but good deeds might add up on tax day.