As a small-business owner, tax planning is something you’re probably already doing without even realizing it. Nevertheless, to ensure that your company’s tax plans are as efficient as possible as it grows, you should take a more strategic approach to tax planning. Startups and small business owners are often in a precarious position when it comes to taxes. They might not need to deal with many taxes since they have few employees. But, they can still face many taxes, and they can find these taxes are often complex and confusing. However, with a few simple steps, planning can become far easier to handle.
Know Your Rights
The tax system is complicated, and sometimes it is hard to stay on top of all of your legal responsibilities. There are so many things to do and many moving parts that it can be challenging to control everything. Should you not be in a position to pay Federal tax in a reasonable amount of time, you can apply for the IRS “Currently Not Collectible” status. This stops the IRS from taking some specific actions against you for non-payment. In addition, you must research laws that can help reduce other taxes over time.
Start With A Proper Business Structure
You can do the most important thing for your business by filing for a Limited Liability Company (LLC) status, but you might not know how to go about doing this. The primary purpose of an LLC is to shield the owners from personal liability. It also provides the owners with the ability to shield their assets from creditors in the case of business failure. Setting up a limited liability company makes it easy to protect your assets from creditors in the event of your business failure. There are many resources out there to help you set up an LLC with minimal hassle on your end.
Keep Business And Personal Expenses Separate
People often mix their personal and professional expenses, which makes tracking their spending more difficult. Additionally, you will have to review your receipts with your accountant at the end of the year, which is time-consuming and costly.
Get it right the first time
When you are setting your business up, you should never forget to consider how you will pay tax. Many startups will put all of their energies into product development and marketing but will only think about tax as an afterthought. However, once the company becomes more established and the honeymoon period ends, there is often an enormous shock when they have to rethink their entire taxation strategy. Therefore, it pays to get it right at the start.
Payroll Taxes Are Important To Remember
Every employee in the United States must pay taxes on money they receive through wages, self-employment, or other types of compensation. At worst, intentionally withholding payroll tax is a Federal crime, and at best, it will result in significant fines. Therefore, it is also essential to keep track of all the payroll contributions your company owes.
Take Advantage Of Home Office Deductions
As a startup, money will probably be tight; therefore, it could be beneficial to use your place of residence to reduce your tax burden. However, to include deductions for home office expenses in your income tax return, you have to maintain a home office. Generally, you must use a room in your home, work from home, or have an area of your home dedicated solely to work. This is different from occupying a private office at your business because you can deduct expenses such as the cost of mortgages, rent, insurance, utilities, and other home office expenses.
Hire Experts In Taxation
As your startup increases in value, so will your tax contributions. Furthermore, it will only become more complex the more prominent you become, which is why you should consider an expert to help you out. There are many benefits of hiring a tax expert. There are many companies, like Taxfyle, that specialize in helping businesses file their taxes. As an expert, they are well-versed in tax laws and can provide you with practical advice on better managing your taxes. This will allow you to save money and ensure you pay the least amount of taxes possible.
Maintain Accurate Records Of Income And Expenses
It’s easy to take for granted the benefits of keeping good records of your finances. Yet if you find yourself struggling to make ends meet, it’s a habit you’ll want to adopt. Maintaining accurate records of income and expenses is more than just a good idea. It’s an essential step toward taking your business from startup status into the big leagues.
Taxation is a complicated process and easy to overlook when focusing on getting your startup off the ground. Nevertheless, it must be your number one priority from day one. By doing so, you will be able to stay out of trouble, and you will have one less thing to worry about.