Business Content

Tax-Time Stress? We’ve Got Tips for Business Owners.

5 Min Read

For most of the year, focusing on running your business can take priority over focusing on your taxes.

It can be easy to put off filing taxes given the many challenges that business owners face.

Digital tax returns tend to have fewer errors than paper returns, which helps reduce processing delays.

When Tax Day looms, if you haven’t done your business taxes, the last-minute scramble to track down paperwork and crunch numbers can feel overwhelming. Especially if you’re new to running a business.

If you’re one of the many last-minute tax filers out there, we want to help by sharing a few tax planning strategies to help you save time, reduce the stress of filing, avoid costly mistakes, and make the process easier next time around.

Maximize Deductions

A large tax bill can lead to cash flow issues, so don’t let your sense of urgency stop you from taking advantage of tax strategies that could lower your taxable income.

Identifying the right deductions can make a big difference. Make sure that each reported expense is accurate to avoid potential penalties if you’re audited.

Business tax deductions may include:

Rent
Mortgage interest and property taxes
Expenses related to your phone/internet service
Office supplies
Costs and depreciation related to equipment or vehicles
Qualified meal and travel expenses
Employees’ salaries, benefits, and continuing education
Professional services
Insurance
Marketing and advertising

One of your best tax moves could be to make last-minute retirement plan contributions, such as to a 401(k), SIMPLE IRA, or Simplified Employee Pension Plan (SEP IRA). Along with supporting your own and your employees’ retirement savings, employer contributions may lower your taxable income. You have until your tax filing deadline to make retirement savings contributions that count toward the tax year.

File Electronically

Returns only need to be postmarked (not received) by your applicable tax deadline but filing online has other benefits in addition to expediency. Digital tax returns tend to have fewer errors than paper returns, which helps reduce processing delays. Filing online also keeps your sensitive financial information out of the mail stream. Make sure you look up the deadline for filing each year.

Safeguard Your Data

Theft and fraud are year-round risks, but they can be especially rampant around tax time. Criminals work to obtain and use sensitive financial information like your Social Security or business tax ID number to commit identity theft, such as by filing fraudulent tax returns in your name.

Here are some recommendations:

When storing or sending financial documents digitally, make sure that your computer’s operating system and firewall are up to date and that you’ve installed the latest antivirus and anti-malware software.
Back up documents on an external hard drive or in the cloud so you don’t lose them in the event of a ransomware attack.
Keep hard copies of financial documents secured in a locked cabinet, and shred documents that you don’t need anymore. Remember to keep your tax records for a minimum of seven years.
Don’t send sensitive information over public Wi-Fi.
Never respond to surprise phone calls or emails from “the IRS” – they’re a scam.

Request an Extension If Necessary

If for one reason or another, you won’t be able to file your return on time, you can file for an extension of six months. This can give you some breathing room and help you avoid a potentially steep penalty for filing late. If you’re a sole proprietor, you’ll need to submit Form 4868. For corporations and partnerships, it’s Form 7004.

Stay Organized Year-Round

Improved bookkeeping may not create new tax savings now, but it could help your tax planning down the road. Consider setting up more robust bookkeeping policies or investing in new accounting software. Also, be vigilant about keeping and organizing records of business expenses, which can help you maximize tax savings next year.

Stay on Top of Your Quarterly Taxes

Since small business owners don’t have income tax withheld year-round like employees do, they usually need to pay estimated taxes quarterly. If you underpay during the current year, you could wind up with a big tax bill next tax season, along with a penalty from the IRS. Your small-business accounting software should be able to help you calculate quarterly tax payments.

Work With a Professional

Is the hassle and complexity of doing taxes distracting you from your day-to-day business? It may be time to hire a professional to help. When you consider the benefits of relying on an outside bookkeeper or CPA – especially having the expertise that helps you avoid costly tax mistakes – it’s probably worth your money.

Be Smart About Business Expenses

Although it’s not uncommon for business and personal finances to be intertwined, keeping them separated is considered a best practice. Making sure your business and personal expenses are clearly separated gives you a better picture of your business’s financial health and avoids confusion and extra work at tax time. Having separate bank accounts and credit cards for personal and business use are key.