Navigating business taxes is an essential skill for any entrepreneur. This guide offers valuable insights for preparing ahead and reducing financial stress during tax season.
Various factors play into your tax obligations, including your entity type, deductions, and more. Consulting with experts in the field can help you choose a structure that aligns with your short- and long-term goals.
Know Your Entity
When preparing taxes, it is essential to hire Denver business taxes. Understanding your entity type is critical as it dictates your federal tax classification, impacts your business’s finances, and determines how your small business files tax documents.
While your choice may not impact your company’s day-to-day operation, it will have significant implications when you sell or raise capital. The type of entity you choose affects your risk exposure and loan/investment opportunities. Plus, it will determine how you pay your business taxes. It may also affect the paperwork requirements and liability protections you offer your business.
Know Your Deductions
As a business owner, you may qualify for various tax deductions that can help reduce your taxable income. These expenses, called write-offs, are subtracted from your gross profit to determine your taxable income. You must have detailed records and consult a tax professional to claim these expenses.
Some examples of tax-deductible expenses include car expenses, meals with clients, and home office expenses (as long as you keep track of the square footage of the space used exclusively for business). Contributions to retirement accounts, health savings accounts, and student loan interest payments are considered “above the line” deductions that reduce your taxable income regardless of whether you itemize or take the standard deduction.
Know Your Licenses and Permits
Managing tax obligations is challenging, and non-compliance can have severe consequences for your business. Knowing which local, state, and federal requirements your business needs to comply with.
Requirements for obtaining necessary licenses and meeting industry regulations may vary by location. It’s also important to keep track of any permits or licenses that expire.
Strategic tax planning goes beyond compliance and helps minimize tax liabilities, ultimately fostering financial resilience for your business. Learn more about these strategies and how to implement them in your business today.
Know Your Tax Rates
Every small business owner in the US is obligated to fulfill their tax obligations. This is one of the most significant expenses for entrepreneurs, but it doesn’t have to be a stressor.
The first step to a stress-free filing season is having accurate and up-to-date books. Accurate bookkeeping helps ensure you have the data to maximize deductions and avoid costly mistakes.
In addition to keeping up-to-date with bookkeeping, you should also know your average and marginal tax rates. Marginal tax rates are essential to understand because they’ll influence how much you pay in taxes if your income goes up or down.
Know Your Tax Deadlines
Whether you’re filing taxes or working with an accountant, you must know essential deadlines. The following tips help you manage tax season and comply with your business tax obligations.
2024 tax deadlines
This is the final day to file your 2024 federal income tax return (and pay any taxes due)—also the deadline for the previous tax year’s IRA and other tax-advantaged retirement contributions. Estimated tax payments are scheduled for the fourth quarter. It applies to self-employed individuals and taxpayers whose withholding doesn’t cover their total tax liability.
Know Your Tax Software
Proper record-keeping is critical for accurate business taxes. That includes a clear account of how your business spends and earns money, records of bad debt write-offs, and vendor accounts.
Accurate financial records also allow for eligible deductions and credits, lowering taxable income. Regularly reconciling your data and keeping organized records will ease tax filing and help you avoid costly errors.
Many filing software programs have free versions for simple returns. Others offer more comprehensive plans for those with complex finances. Consider a program’s price and customer support before making your purchase.
Know Your Tax Options
Many small businesses need to make quarterly estimated tax payments. This is an excellent way to avoid paying taxes in one lump sum.
An accounting software program helps minimize human error when filing your business taxes. Software can also help to automate processes, saving you time and money.
Another strategy that saves taxes is to support charitable causes, which can enhance your brand image and reduce your tax liability. Lastly, you can use section 179 to write off the total purchase price of expensive equipment, lowering your tax bill.
