5 Tax Tips for Small Business Owners

The best tax tips for small business owners are the simplest ones. You may find accountants willing to extend advice to "maximize" your deduction or hear of new strategies from a friend. In the end, though, filing taxes is a straightforward process, and keeping it simple will give you the greatest peace of mind.

#1 Think About "Do It Yourself" Options

Many small business owners want to file their taxes on their own. Today, there are a number of tax software companies that would have you believe this is a good idea. If you have a very simple tax schedule and qualify for the EZ forms with the IRS, this may be a good option. Otherwise, the time and stress you devote toward the process is typically not worth the few hundred dollars you save.

#2 Consider Limited Services of an Accountant

While you may not want to entirely do-it-yourself, you also may not want to hand everything over to an accountant. Try using a tax software that allows you to prepare all of your forms yourself. Print these forms off, take them to an accountant with your receipts and allow an accountant to check for errors or missed deductions. This way you get the best of both worlds: you save a little money, but you also save stress.

#3 Keep Track of Mileage and Expenses

The more you keep track of things along the way, the less you have to do when it is time to actually file your taxes. This is such simple advice, but few small business owners use it. Purchase a mileage log that works for you. If you like to enter things manually, buy a ledger. If you are a technology fan, download a spreadsheet template. At the end of each day or week, update the log. You will thank yourself come tax season.

#4 Hold on to Receipts

Receipts are everything when it comes time for an audit. It is essential to hold on to your receipts, make copies of them, and organize them. This makes filing your deductions far easier, and it assures you can back up your claims if the IRS does come knocking. Some small business owners like to use a separate credit card or bank account for each type of expense. This can be very helpful, especially if your expenses can be easily categorized into five or fewer groups. Then, all you need to do is get a credit card statement for that one card if you ever lose a receipt or group of receipts. 

#5 Know Your Deductions

It can help to understand the types of things that can be deducted from the beginning. This saves you the hassle of going back through your accounts searching for deductions. Consider taking a class on small business accounting, purchasing a book on the topic or keeping a checklist handy. As you go through a given year, check any expense you make to see if it falls in your list of qualified deductions. This will allow you to properly budget for the expense and plan your taxes.

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