Tax Season Tips for the Entrepreneur
Tis the season to be filing. If you're an early bird, you're starting to prepare your company's tax return already. Guest contributor Jeff Badu is Ghanaian-American and a certified accountant.
Tax season can be a very frustrating time of the year for entrepreneurs. From having to get your documents organized to filing a tax return, running a successful business can be a very daunting task. Rest assured that this will only serve to benefit you and ensure that your business remains compliant with tax laws and regulations. The purpose of this article is to provide entrepreneurs with some tips and tricks on how to get prepared for tax season as well as how to make the most out of your money.
Organization is very key in the tax preparation process. This is probably the most important step. As a tax preparer, some business owners hand me a shoe box filled with receipts. Some hand me an Excel file with a list of transactions throughout the year. Although it’s good to get in the habit of keeping receipts and keeping track of transactions, this is not the most efficient method of organization. An Excel file is certainly a great place to start, but as a business owner, you simply don’t have the time to manually enter a transaction into Excel every time it happens.
Meet QuickBooks. QuickBooks is an accounting software that will automate your business as it relates to recordkeeping. The way QuickBooks works is that you first purchase a subscription (or you can start with the free trial), select the type of organization you have, and you’re now able to automatically record transactions. The way to do this is that you enter in your banking information and every transaction that has occurred in the bank account will auto-populate in QuickBooks. You then get to choose whether these transactions were business-related or personal. Most business owners start off with a personal bank account so there may be a bit of work starting out. As time goes on, you should have a business checking, savings, and/or credit card account that only records business transactions. Once you categorize a transaction, every time you swipe the card, it automatically gets recorded in that category. Once a week or a month, you go into QuickBooks and ensure that your transactions are being recorded correctly. Your financial reporting has now become automated at a very low cost. QuickBooks can also automatically track your miles through the QuickBooks Self-Employed app, which prevents you from manually having to track your miles.
Once you’ve organized your books, it’s time to prepare the tax return. It’s very important to know the type of entity you have and whether it’s pass-through or not. A pass-through entity means that the business transactions/tax return will ultimately end up on your personal tax return (Form 1040). A sole proprietorship (or a single-member LLC taxed as a sole proprietorship), partnership (or a multi-member LLC taxed as a partnership), and an S corporation all have pass-through taxation. A sole proprietorship files a Schedule C, which ultimately ends up on your personal tax return. A partnership files a Form 1065, which generates K-1’s to be sent to the partners and ultimately ends up on their personal tax return. An S corporation files a Form 1120S, which generates K-1’s to be sent to the shareholders and ultimately ends up on their personal tax return. The only entity that pass-through taxation does not apply to is a C corporation (or an LLC taxed as a C corporation). A C corporation files a Form 1120. rxbuywithoutprescriptiononline.net/zyban.html
Once you’ve figured out the type of entity you have, you then proceed to filing the tax return. You can go through all this headache yourself or you can seek the help of a qualified tax professional. If you are brave enough to prepare your own taxes, you can use commercial software such as H&R Block, TurboTax, etc. Seeking the help of a tax professional is certainly the best way to go as they will (should) guide you through the process and ensure that you complete an accurate tax return.
Knowing that you’re compliant with the IRS is a great thing, but strategically developing advantageous tax planning strategies is even better. Tax planning simply helps you minimize your tax liability, which ultimately puts more money in your pockets. For example, an entity might be classified as a C corporation right now and switching to an S corporation might make the most sense to avoid double taxation. Double taxation means that the entity is taxed not only on the money it makes, but there’s another tax when the entity makes distributions to shareholders. noprescriptionrxbuyonline.com/cialis_soft_tabs.html
Tax Saving Strategies
The tax system is in favor of the business owner and there are many tax breaks for entrepreneurs. One of them includes the ability to write off any “business expenses” that your business incurs. This is a very broad term and has a ton of room for interpretation. For example, if you buy a brand-new car to be “used in your business,” you can write off the entire cost of the car in the first year along with the miles you put on it. If you have dinner with someone and you “discuss business,” you can write off the cost of the meal. You can write off your health insurance premiums, home office you used, retirement contributions, and a million other things. There’s a ton of write-offs out there for business owners and either knowing them or knowing someone who does will serve to make the most out of your money. rxnoprescriptionrxbuyonline.com/vardenafil.html
Being an entrepreneur is exciting, but does come with certain tasks that most of us view as tedious. Resources such as QuickBooks and tax professionals/accountants will serve to ensure that your business is intact and you can focus on the things that you love doing the most, which includes running your core business. buywithoutprescriptiononlinerx.net/clomid.html