How to Get Started: Small Business Tax Preparation

The process of small business tax preparation can be a bit intimidating for those that know little about taxes. However, with a few simple steps, you can avoid any problems with your business tax return. Here are the basics of how to get started planning for your small business taxes. 

Get Competent Advice

One of the most important things that you can do is get help from a qualified tax professional or accountant. You need to know that you have someone looking over your shoulder and helping you avoid major mistakes along the way. A good accountant should be able to give you some great tax tips and get you started on the yearly process of preparing for taxes. Most small businesses rely on someone else to help them file their taxes and go over their books with them.

Save Receipts

In preparation for the upcoming year, you need to get in the habit of saving receipts for business expenses. Any business expense that is "ordinary and necessary" can be deducted from your business taxes. If you do not remember to keep track of these expenses with receipts, you are throwing away a large potential deduction. This will increase the tax bill that you owe at the end of the year. 

Even small expenses should be tracked with receipts. While the government does not require you to keep receipts for expenses less than $75, you will have to know the circumstances of the expense. They will want to know where the expense came from and why you needed it for business reasons. Therefore, it is much easier to keep a receipt than to remember this information or keep track of it some other way. Get a file for receipts and put everything in there throughout the year. It can make a very big difference on your taxes.

Year End Preparation

When you get close to the end of the year, there are several things that you can do to lower your tax bill. Evaluate your cash flow situation and decide whether or not you can afford to make any purchases. If you are good on cash flow, it may be to your advantage to go ahead and purchase some things that you are going to need next year. You could stock up on supplies, pay any bills that you may have early, and buy new equipment. The more expenses that you can generate, the lower your tax burden is going to be.

If someone owes you money, you may want to consider delaying the payments until January of the following year as well. If you receive a payment in December it bumps up your total income for the year. Therefore, this is going to increase your tax bill overall. Any small moves like this can help you lower your overall tax obligation and save your business money in the long-term.