I felt inspired to share some helpful tips on how you can save money on your small business taxes. Although I am not a CPA or accountant, I have manged my own business books and done my own business taxes for 13 years now. Along the way I have learned some helpful tips that will benefit any small business owner, even network marketers. Therefore, I would like to share my top 5 ways to save money on your small business taxes.
1. Educate Yourself
The first and best thing you should do to save money on your small business taxes is educate yourself. You should read a book or two about what you can and can’t legally deduct. You should hire an accountant for an hour or two and ask them any tax questions you might have. Keep a journal or notebook with you and write down your tax or bookkeeping questions whenever you think of them. Also, you should talk with other entrepreneurs in similar industries about any tax tips they could offer. By no means do you need to be a tax expert yourself, but you should have some basic fundamental knowledge.
2. Work with a CPA
Every penny you spend with your small business CPA is money well spent. If you are sick, you go to a doctor. If you need your teeth cleaned you visit a dentist. So if you need help with your small business taxes, you should visit a CPA. I highly recommend you work with a CPA who specializes in small business. This doesn’t mean you need a CPA to actually prepare your taxes (unless you want them to), but you should have a CPA as your trusted adviser to help you with your overall tax planning and tax strategy.
3. Utilize Accounting Software
There are so many different software programs out there that let you manage your business finances. The most popular is QuickBooks. Personally, I just use Microsoft Excel. Whatever you do, pick a software program that is easy for you to use, something that you understand. The benefit of using software is that it lets you create reports such as your profit and loss statement and balance sheet. These reports let you know where your business stands financially at all times. It also makes preparing for tax time much easier.
4. When In Doubt, Ask an Expert
The IRS talks about how many people cheat on their taxes each year. That might be true, but what they fail to mention is the amount of people who overpay in taxes each year because they don’t maximize their LEGAL tax deductions. If you have categories or expenses that you are unsure of, please consult with your CPA before you decide NOT to claim them. There are so many legal tax deductions for small business owners that most people don’t know about and don’t use. When you fail to legally deduct things you end up overpaying your taxes. Don’t make that common mistake.
I’ll admit, I’m not the most organized guy in the world. But when it comes to my business paperwork and business finances I am one of the most organized guys you will meet. You need a filing cabinet or drawer for your business paperwork. You should organize all your receipts by month. You should have a system for managing invoices. You need to keep copies of your back taxes. What you need to do is create an organization system that works for you and stick to it. You don’t want to be the person who brings a bunch of receipts to their CPA at the end of the year for them to sort through and figure out.
As an extra bonus tip, I would tell you to update your financial reports every month. Minimum once a month take an hour or two and update your profit and loss statement. This will give you an “eagle eye view” about the financial health of your network marketing business. You shouldn’t wait until tax time to know where your business stands.
In summary, these are my five best ways to save money on your small business taxes. As a small business owner, you should do whatever you can do to legally minimize your tax burden. I’m all about paying our fair share of taxes, but not a dollar more.
On a side note, if you have any experience with small business taxes, I would love to hear from you. What are your best tips on how to save money on your small business taxes? Just leave a comment to share your thoughts.