What you need to do at the end of the year to prepare for tax time
One of the best parts of being a small business owner is knowing that you control the money in your company. Part of owning a small business is making sure you keep track of your finances.
Tracking your finances helps you to make an accurate budget, helps you to know where your money is going, allows you to cut down on unnecessary expenses, and help you to pinpoint problems if there is a discrepancy on your statement.
In addition, keeping track of your finances is also necessary for preparing for tax season.
The following are a few things you need to do at the end of the year to prepare for tax time:
Know tax laws and requirements
In order to properly manage your taxes for your small business, you will need to obtain from the IRS a federal Tax Identification Number, which you can apply for on the IRS' website. As far as taxes go, to give you a general idea, most likely you can expect the following:
Federal, state and local income taxes on your earnings from your business
Self-employment taxes (roughly 15.3 percent) on everything you've earned from over $400. These are paid quarterly.
You will also need to file Schedule C form (income or loss from a trade or business) with your Form 1040 each year you have your business
Use financial software
Software designed specifically for managing money can make all the difference in the world to you when trying to keep track of your finances for personal and tax purposes. Programs like Quicken, Microsoft Money, and Peachtree Accounting are all good, affordable programs that will help you track payments, manage payroll, internet postage, accounts receivable and payable, and many other useful tools you will need for small business money management that may be needed for tax season.
Consider hiring an accountant
If you find that you are struggling with preparing for and planning for taxes, or you feel you are better suited to focusing your talents and energies elsewhere with the business, consider hiring an accountant. A good accountant can mean the difference between a company that prospers and grows financially or one that sinks. By doing research, asking for referrals, and conducting interviews, you can find a good accountant who will become invaluable to your business. Find an accountant familiar with the circumstances of your business; for example, if you have a business conducted primarily online, your accountant should be internet-savvy.
If you are new to operating a small business, an accountant will come in handy particularly around tax time. You can find a good accountant for managing your taxes and accounting in a number of ways. One is to ask for referrals. Business associates, friends, and referral services that can be found on the internet can be very helpful when it comes to finding a good accountant.
There are a number of things you need to keep in mind when preparing and planning for tax season. Even if you hire a professional, it's a good idea to have a handle on the ins and outs of your company's finances. Keeping detailed records and using software to stay organized are just a few of the things you can do to be ready when it comes time for taxes.