TAXES, TAXES, TAXES!

As a business owner, it's easy to lose track of taxes and face difficulties during tax season.

“Tax is not an end-of-year event. It’s a yearlong planning session.”

Whether you're struggling to find time for write-offs or planning to save it all for April, business taxes need attention throughout the year.

Here are some simple, actionable tips to integrate taxes into the daily operations of a growing business — and help you avoid unexpected penalties or fees.

Choose a tax method

As a business owner, you can either withhold taxes from your paycheck or make quarterly estimated tax payments. Withholding taxes includes amounts for pension and Social Security and automatically sets your tax money aside. With quarterly payments, you estimate the taxes owed every three months and send it to the IRS (and yes, if you overpay, they’ll eventually refund you). To calculate your estimated tax, use Form-1040ES.

Set aside money for taxes.

If you’re filing quarterly, 15 is the magic number. Avoid stress by setting aside 15% of revenue for taxes, then make payments on April 15, June 15, September 15, and January 15 of the following year. Each payment should cover taxes for the previous three months (so, the April payment covers January through March). Add these dates to your business calendar to stay on track!

Pro tip :

To avoid penalties, follow these IRS guidelines for estimated tax payments:

• Pay 90% of the current year’s tax or 100% of the prior year’s tax shown on your tax return.

• If your adjusted gross income is higher ($150,000 Married Filing Jointly (MFJ)/ $75,000 Married Filing Separately (MFS)), pay 110% of the prior year’s tax.

Stay in touch with your accountant

Having a financial advisor who understands you and your business can help you manage your business finances. Regular check-ins are an investment in your business and provide peace of mind as you calculate withholdings, tax payments, and more.

Use accounting software

Say goodbye to that shoebox full of receipts and keep all your information in one place. Basic accounting software is often surprisingly affordable and can help you digitize and categorize receipts and even transfer information to tax software for filing.

Consider possible tax deductions

You may wonder what tax write-offs are applicable to your business. To calculate your deductions, consider the items on the list below and share them with your accountant.

Tax write-offs:

• Advertising and promotion

• Bank fees

• Business meals

• Education

• Home office

• Health insurance

• Legal and professional fees

• Self-employment tax deduction

• Internet and phone

• Travel expenses

• Retirement expenses

Separate business and personal finances

Open separate bank accounts for personal and business use and use your business account exclusively for business transactions. This will simplify your taxes and prevent the IRS from needing to examine your personal accounts if you have the misfortune of being audited.

Stay informed about tax deductions.

Schedule time to catch up on current tax laws and learn which deductibles apply to your business. Since Covid-19, there have been many changes to the tax codes affecting small businesses. Visit IRS.gov for the latest updates.

Report all income to the IRS

Ensure the income you report to the IRS matches the amount reported on the 1099 forms you receive. Be sure to report all income, even if a client doesn’t send a 1099. Ultimately, reporting and payment are your responsibility.

Avoid surprise penalties and fees

Mark your calendar for April 15th, the deadline for tax returns. Need more time? Request an extension to file until October 15th. Failure to file results in a 5% monthly fee on the unpaid tax, capped at 25%. If your return is over 60 days late, a minimum penalty applies.

Even if you file for an extension, the IRS expects full payment of taxes by the April 15th filing date. If not, the IRS will charge a failure-to-pay penalty, a 0.5% fee on the unpaid tax per month, capped at 25%.

There you have it...... I hope this helps with your planning.