Many new businesses experience tax problems. Here are a few potential tax problems that you will want to look out for during your small business's first year.
1. Trying to File Taxes
Many new small business owners feel that they are skilled enough to file their own taxes. When a business owner has never attempted to file business taxes before, they will most likely not understand the complexities of the job. By filing your own taxes as a business owner, you are opening yourself up to many potential problems. If you do not file the taxes correctly, it could result in fines or additional unexpected taxes in the future. In most cases, it will be to your advantage to try and hire a certified public accountant to do the job for you.
2. Problems Finding a CPA
Many new small businesses make mistakes when it comes to hiring a CPA. When you are new in business, you may not know who to turn to for tax help. As a result of this, you might end up hiring an accountant that is not skilled enough to handle the job. When you hire an accountant to do your taxes, their mistakes can end up costing you money. Therefore, it is important for you to find a quality accountant as soon as possible.
3. Estimated Tax Payments
Another potential problem that you might face during your first year of business is dealing with estimated tax payments. As a business, you will have to submit quarterly tax payments to the IRS. These payments are based on an estimation of how much you are going to make for the year. When you have never been through an entire year before, you really do not know how much revenue you will bring in.
This can make it very difficult to decide how much to send the IRS. If the company sends too much, it might be cutting itself short in other areas. If the company does not send enough, it might have to come up with a large amount of money at the end of the year. After your business has been established for a few years, it will be easy to predict how much money it will bring in on an annual basis. However, that first year can be very difficult to predict.
4. Tax Planning
Implementing a tax planning strategy can also be difficult during the first year of business. Many businesses will proactively plan for their taxes at the beginning of the year in order to limit their overall tax liability. There are a number of steps that you can take in order to lower the amount of taxes that you pay for your company.
When you do not have financial numbers to work with, this can be very difficult. For example, you might not know how much your company needs to spend in order to offset its gains effectively.