Tax season is coming, and small business owners should start preparing now in order to save some stress. Because we know just how busy small business owners are, we have made sure to share simple tips that you won’t consider a hassle in themselves.
Tax tips for bloggers
1. Purchase Tax Software Designed for Small Businesses
Tax software – whether it be W-2 software or 1099 software – is one of those expenses that you should not mind making, especially because the expense can be used on your taxes. When purchasing tax software, you must first ensure that it is designed for small businesses. If you choose a software solution that is designed for large corporations or enterprises, it will have too many bells and whistles and won’t help you save any time.
Look for software that handles the basics and is user friendly enough that you will be happy to use it; consider software that supports your number of employees and contractors, supports your commonly used tax forms like W-2s and 1099s, allows you to enter data using a familiar spreadsheet form, and saves data you enter so that it is not lost when you get interrupted.
2. Implement a Simple Record Keeping System
If you or your employees need to go through five steps just to file receipts or invoices, your records will be a mess. Because you will need hard evidence of your expenses and deductions, keep a file box handy for receipts and other documents that will support your tax return. You can decide how you want to label the file folders, but keep in mind the most common expenses that you have so your files will be easy to use. Consider making a file for advertising, phones, computer and internet, transportation and travel, payments made to independent contractors, insurance, interest, office supplies, and your home office.
You should have a file box in a location that is easy for your employees to access as well. Make sure everyone knows your record keeping expectations and that they should have all receipts and documents to you in a timely manner. The easier you make record keeping for everyone, the more likely you are to have complete records when tax season arrives.
3. Keep the Self-Employment Tax in Mind
Many small business owners who are self-employed also have to remember their responsibility for the self-employment tax (SE tax). This tax really amounts to your social security responsibility and roughly equals 14% of your self-employed earnings. You should save money from your pay throughout the year to cover this tax and be prepared for your tax software or accountant to remind you that you owe more than your federal income tax when tax season hits.
4. Regularly Review Financial Statements to Estimate Your Tax Liability
Take some of the mystery out of your quarterly taxes and self-employment tax liability by regularly reviewing your financial statements. If you evaluate anticipated and actual profit numbers, you will have a better chance of knowing your federal, state, and local tax liabilities and being more accurate with your estimates so you don’t face penalties or have to scramble for extra cash when your taxes are prepared. Regular review will give you peace of mind and help you make other business decisions as well; it also lets you see if you need to make more purchases, give employees bonuses, or contribute to your retirement plan to help you save on taxes.
Rather than going to great lengths to prepare for tax season at the last moment, consider implementing our four handy resources to make things easier on you and your small business at tax time.
Also read: 5 Things Bloggers Should Know About Taxes
About the author: Julie Morris is a life and career coach. She thrives on helping others live their best lives. It’s easy for her to relate to clients who feel run over by life because she’s been there. After years in a successful (but unfulfilling) career in finance, Julie busted out of the corner office that had become her prison. Today, she is fulfilled by helping busy professionals like her past self get the clarity they need in order to live inspired lives that fill more than just their bank accounts.
