Tax preparation for small businesses can be a tedious task. Keeping a record of all your business transactions from the beginning of the financial year can make it easier for you to estimate their year-end taxes.
Filing your taxes can become a laborious task if you do not prepare for it timely and you may end up wasting a lot of time trying to sort out your dues. Additionally, you are likely to be penalised if you make errors while filing your taxes.
Here are a few simple tips for tax season that can help your business save taxes and be more efficient while calculating year-end taxes.
Start gathering the necessary documentation
Organising and collecting valid documents for all business expenses and deductions well ahead of the year-end tax calculations ensures that you are ready for tax season. Organise receipts and invoices for items that are generally overlooked like a subscription for a software or domain registration expenses, memberships like Amazon Prime and so on. Any such expenses that can be categorised solely as business expenses are considered deductibles.
Many unnoticed expenses could go under the radar while calculating your taxes. Try to gather receipts for expenses incurred on business trips or trade fairs that include parking and other overheads associated with the trip. Another great way to keep a note of all your expenses is to monitor the credit and debit card statements of your business. The services of any paid professionals like a lawyer, a business-related publisher or a tax accountant should also be documented in your tax file. This will help you manage your taxes efficiently and complete the process in a timely manner.
Review your financial statements
Reviewing business expenses quarterly makes it easier for a small business to keep a track of their numbers and pay estimated quarterly taxes to be eligible for tax returns. Conducting regular checks of your accounts makes it easier to manage expenses and payments that can incur late payment penalties. Planning for capital investments or paying bonuses to employees becomes easier as you can estimate your tax liabilities beforehand. This will also help in reducing avoidable expenses, which in turn can reduce your taxes.
Planning ahead of the actual due date makes it easier for small businesses to avoid penalties and other charges during the time of tax file preparation. It helps businesses estimate their tax payments at the end of the year.
Maximise year-end deductions
There are many tax deductions that small businesses can benefit from like paying bonuses, purchasing new inventory, employee welfare activities, charity and more. Maximising your deductions before the year-end tax calculation is an effective and legal way to minimise your tax liabilities. You can plan to buy new office equipment right before the year-end tax calculation to increase your tax deductibles.
Giving to charitable causes is not only a good decision but also a beneficial tax season tip for small businesses. Employee bonuses are a major deductible that are taken into consideration while preparing to file taxes. Any activity that is conducted for the sole purpose of employee motivation and attended only by the employees can also be included as a deductible as it is a business-related expense.
These tips for the tax season can make a great difference in the approach taken by small businesses. If implemented properly, these steps can help you be more organised in terms of keeping track of your expenses. It will also help you reduce tax liabilities and plan your taxes well ahead of time to avoid last moment scrambling for receipts and payment records.
