Entrepreneurs often overlook the importance of complying with legislation when starting a business, including federal, state, and local regulations. Tax obligations are particularly confusing and prone to change, making it even more challenging for small and medium-sized businesses to navigate without professional assistance from people like finance auditors. To help startups and small businesses stay tax compliant, here are six essential tips:
1. Conduct Research
While not everyone can fully understand complex tax regulations, it’s essential to have a basic knowledge of taxation.
Familiarize yourself with financial terms related to tax compliance, such as revenue, net sales, gross profit, and cost of goods sold. This understanding will provide a foundation for tax filing and compliance.
2. Separate Personal and Business Finances
Create separate accounts for personal and business finances to avoid complications with the IRS. Having distinct accounts makes tax filing more straightforward and ensures a clear financial record for your business. Additionally, keeping personal and business expenses separate maintains privacy and avoids potential issues.
3. Avoid Clerical Errors
In the early stages of a startup, business owners and their staff often take on multiple roles. While this is common, errors, ignorance, and multitasking can lead to tax mistakes. Simple mistakes like data entry errors, late reporting, or omissions can result in severe penalties and high-interest rates. Take caution during record keeping and tax filing to minimize errors.
4. Maintain Accurate Records
Accurate record-keeping is crucial for smooth tax filing. Whether using accounting software or manual methods, ensure your records are precise. Be mindful of categorizing expenses correctly, such as recording free samples as marketing expenses and including credit points as business income to avoid future audit stress.
5. Document Fringe Benefits
As your business grows, you may offer fringe benefits to employees, such as bonuses, memberships, trips, company cars, or gifts. Keep records of these benefits as they may be considered taxable income. Research the tax requirements for different types of rewards to accurately document them.
6. Seek Professional Assistance
Filing taxes is a specialized field that requires expertise. As a startup owner, consider hiring a certified public accountant (CPA) or professional tax service to handle your tax compliance. Professionals can guide you in developing the right tax plan for your business and ensure accurate and timely filing.
While professionals can help you with tax compliance, it’s essential to invest time in understanding tax legislation in your region. By learning the laws and their implications, you can make informed financial decisions, avoid penalties, and choose external experts wisely. By combining your knowledge of tax regulations with professional assistance, you can confidently meet your tax obligations and safeguard your business’s success.
The team of experts at Sharp LCC tax services Philadelphia is at your disposal if you need professional help. They have the knowledge and experience to keep your startup tax compliant. Simply reach out to them to learn about the services they offer.